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- From: Business,
- Posted on: Tue 05 Aug, 2014
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1. Lyle O’Keefe invests $42,800 at 10% annual interest, leaving the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Lyle withdrew the accumulated amount of money.

(a) Compute the amount Lyle would withdraw assuming the investment earns simple interest. (Round answers to 0 decimal places, e.g. $458,581.)

(b) Compute the amount Lyle would withdraw assuming the investment earns interest compounded annually. (Round answers to 0 decimal places, e.g. $458,581.)

(c) Compute the amount Lyle would withdraw assuming the investment earns interest compounded semiannually.

2. Using the appropriate interest table, compute the present values of the periodic amounts, due at the end of the designated periods.

(a) $50,260 receivable at the end of each period for 7 periods compounded at 12%.

(b) $50,260 payments to be made at the end of each period for 17 periods at 10%.

(c) $50,260 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

3. (a) Ron Stein Company recently signed a lease for a new office building, for a lease period of 12 years. Under the lease agreement, a security deposit of $14,210 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

(b) Kate Greenway Corporation, having recently issued a $20,156,000, 15-year bond issue, is committed to make annual sinking fund deposits of $616,200. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds?

If not, what will the deficiency be?

(c) Under the terms of his salary agreement, president Juan Rivera has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $75,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?

4.Stephen Bosworth, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 9% basis that will enable him to withdraw $27,600 per year on June 30, beginning in 2016 and continuing through 2019. To develop this fund, Stephen intends to make equal contributions on June 30 of each of the years 2012–2015.

(a)How much must the balance of the fund equal on June 30, 2015, in order for Stephen Bosworth to satisfy his objective?

(b) What are each of Stephen's contributions to the fund?

5.

Consider the following independent situations.

(a) Mark Yoders wishes to become a millionaire. His money market fund has a balance of $352,185 and has a guaranteed interest rate of 11%. How many years must Mark leave that balance in the fund in order to get his desired $1,000,000?

(b) Assume that Elvira Lehman desires to accumulate $1 million in 14 years using her money market fund balance of $263,331. At what interest rate must Elvira’s investment compound annually?

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