HCS385
Week Three Financial Exercises
Part 3
Complete the following problems:
1) How much will you have saved after 6 years by contributing $1,200 at the end of each year if you
expect to earn 11% on the investment?
Answer: $9,495.43
2) A business owner plans to deposit his annual profits in an investment account earning a 9% annual
return. If the owner starts with their first deposit today for $22,000 and expects to make the same
profit for the next 7 years, how much will be saved for retirement at that point?
Answer: $242,626.42
3) An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes
these contributions at the end of the next 20 years, what is the present value of this investment
today?
Answer: $4,115.45
4) What is the present value (PV) of a 12-year lease arrangement with an interest rate of 7.5 percent
that requires annual payments of $4,250 per year with the first payment being due now?
Answer: $32,875
5) A recent college graduate hopes to have $200,000 saved in their retirement account 25 years from
now by contributing $150 per month in a 401(k) plan. The goal is to earn 10% annually on the
monthly contribution. Will they have the $200,000 at the end of the 25 years?
Answer: No the graduate will be about $975 short of the $200,000.
This study source was downloaded by 100000872281541 from CourseHero.com on 10-04-2023 13:10:33 GMT -05:00
https://www.coursehero.com/file/60088022/HCS385-wk3-financial-exercises-part3docx/
Week Three Financial Exercises
Part 3
Complete the following problems:
1) How much will you have saved after 6 years by contributing $1,200 at the end of each year if you
expect to earn 11% on the investment?
Answer: $9,495.43
2) A business owner plans to deposit his annual profits in an investment account earning a 9% annual
return. If the owner starts with their first deposit today for $22,000 and expects to make the same
profit for the next 7 years, how much will be saved for retirement at that point?
Answer: $242,626.42
3) An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes
these contributions at the end of the next 20 years, what is the present value of this investment
today?
Answer: $4,115.45
4) What is the present value (PV) of a 12-year lease arrangement with an interest rate of 7.5 percent
that requires annual payments of $4,250 per year with the first payment being due now?
Answer: $32,875
5) A recent college graduate hopes to have $200,000 saved in their retirement account 25 years from
now by contributing $150 per month in a 401(k) plan. The goal is to earn 10% annually on the
monthly contribution. Will they have the $200,000 at the end of the 25 years?
Answer: No the graduate will be about $975 short of the $200,000.
This study source was downloaded by 100000872281541 from CourseHero.com on 10-04-2023 13:10:33 GMT -05:00
https://www.coursehero.com/file/60088022/HCS385-wk3-financial-exercises-part3docx/
