FIN 486 Something Great /uophelp.com FIN 486 Something Great /uophelp.com | Page 13

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.