Case Single cash flow Interest rate Deposit period ( years ) A $ 200 5 % 20 B 4,500 8 7 C 10,000 9 10 D 25,000 10 12 E 37,000 11 5 F 40,000 12 9
P5 – 5 Time value You have $ 1,500 to invest today at 7 % interest compounded annually .
a . Find how much you will have accumulated in the account at the end of ( 1 ) 3 years , ( 2 ) 6 years , and ( 3 ) 9 years .
b . Use your findings in part a to calculate the amount of interest earned in ( 1 ) the first 3 years ( years 1 to 3 ), ( 2 ) the second 3 years ( years 4 to 6 ), and ( 3 ) the third 3 years ( years 7 to 9 ).
c . Compare and contrast your findings in part b . Explain why the amount of interest earned increases in each succeeding 3-year period .
P5 – 8 Time value Misty needs to have $ 15,000 at the end of 5 years to fulfill her goal of purchasing a small sailboat . She is willing to invest a lump sum today and leave the money untouched for 5 years until it grows to $ 15,000 , but she wonders what sort of investment return she will need to earn to reach her goal . Use your calculator or spreadsheet to figure out the approximate annually compounded rate of return needed in each of these cases :
a . Misty can invest $ 10,200 today . b . Misty can invest $ 8,150 today . c . Misty can invest $ 7,150 today .