1. Using the Rule of 72, approximate the following amounts: (LO1.1)a. If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double?b. If you earn 10 percent on your investments, how long will it take for your money to double?c. At an annual interest rate of 5 percent, how long will it take for your savings to double?2. In 2019, selected automobiles had an average cost of $16,000. The average cost of those same automobiles is now $20,000. What was the rate of increase for these automobiles between the two time periods? (LO1.1)3. A family spends $46,000 a year for living expenses. If prices increase 3 percenta year for the next three years, what amount will the family need for their living expenses after three years? (LO1.1)4. Ben Collins plans to buy a house for $260,000. If the real estate in his area isexpected to increase in value 2 percent each year, what will its approximate value be seven years from now? (LO1.2)5. What would be the yearly earnings for a person with $9,000 in savings at an annualinterest rate of 2.5 percent? (LO1.3)6. Using time value of money tables ( Exhibit 1–3 or chapter appendix tables), calculatethe following: (LO1.3)a. The future value of $550 six years from now at 7 percent.b. The future value of $900 saved each year for 10 years at 8 percent.c. The amount a person would have to deposit today (present value) at a 5 percentinterest rate to have $1,000 five years from now.d. The amount a person would have to deposit today to be able to take out $500 ayear for 10 years from an account earning 8 percent.7. If you desire to have $12,000 for a down payment for a house in five years, what amountwould you need to deposit today? Assume that your money will earn 4 percent. (LO1.3)8. Pete Morton is planning to go to graduate school in a program of study that willtake three years. Pete wants to have $8,000 available each year for various schooland living expenses. If he earns 4 percent on his money, how much must hedeposit at the start of his studies to be able to withdraw $8,000 a year for threeyears? (LO1.3)9. Carla Lopez deposits $2,800 a year into her retirement account. If these funds haveaverage earnings of 8 percent over the 40 years until her retirement, what will be thevalue of her retirement account? (LO1.3)10. If a person spends $10 a week on coffee (assume $500 a year), what would be thefuture value of that amount over 10 years if the funds were deposited in an accountearning 3 percent? (LO1.3)11. A financial company that advertises on television will pay you $60,000 now forannual payments of $10,000 that you are expected to receive for a legal settlementover the next 10 years. If you estimate the time value of money at 10 percent, wouldyou accept this offer? (LO1.3)12. Tran Lee plans to set aside $2,600 a year for the next seven years, earning 3 percent.What would be the future value of this savings amount? (LO1.3)13. If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal payments at the end of the next five years, what would be the amount of each payment?( Note: Use the present value of an annuity table in the chapter appendix.) (LO1.3)
