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Problem 1

Find the accumulated amount \(A\) if the principal \(P\) is invested at the interest rate of \(r /\) year for \(t\) yr. $$ P=\$ 1000, r=7 \%, t=8, \text { compounded annually } $$

Expert verified

The accumulated amount after 8 years with the given principal amount, interest rate, and compounding frequency is approximately $1,716.69.

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Chapter 4

A city has $$\$ 2.5$$ million worth of school bonds that are due in $20 \mathrm{yr}$ and has established a sinking fund to retire this debt. If the fund earns interest at the rate of \(7 \%\) /year compounded annually, what amount must be deposited annually in this fund?

Chapter 4

Find the present value of each ordinary annuity. $$\$ 3000 /$$ semiannual period for 6 yr at \(11 \%\) year compounded semiannually

Chapter 4

The Betzes have leased an auto for 2 yr at $$\$ 450 /$$ month. If money is worth \(9 \% /\) year compounded monthly, what is the equivalent cash payment (present value) of this annuity?

Chapter 4

Maria, who is now 50 yr old, is employed by a firm that guarantees her a pension of $$\$ 40,000 /$$ year at age \(65 .\) What is the present value of her first year's pension if the inflation rate over the next \(15 \mathrm{yr}\) is \(6 \% / \mathrm{year}\) compounded continuously? 8\%/year compounded continuously? \(12 \% /\) year compounded continuously?

Chapter 4

The inflation rates in the U.S. economy for 2003 through 2006 are $1.6 \%, 2.3 \%, 2.7 \%\(, and \)3.4 \%$, respectively. What was the purchasing power of a dollar at the beginning of 2007 compared to that at the beginning of \(2003 ?\)

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