Time+Value+of+Money+Problems-3-1+%2810%29+%281%29+%284%29

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Sacramento City College *

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Economics

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Feb 20, 2024

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Time Value of Money Problems 1. Using the rule of 72, approximate the following amounts. Look up Rule of 72 online. a. If the value of land in an area is increasing 7 percent a year, how long will it take for property values to double? 10.2 years b. If you earn 10 percent on your investments, how long will it take for your money to double? 7.3 years c. At an annual interest rate of 5 percent, how long will it take for your savings to double? 14.4 years 2. Sara plans to buy a house for $120,000. If that real estate is expected to increase in value by 5 percent each year, what will its approximate value be seven years from now? Table __________________ls Answer __________________162,000 3. If you desire to have $10,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 5 percent. Table __________________fva Answer __________________ 7,835.27 4. Pete Morton is planning to go to graduate school in a program of study that will take three years. Pete wants to have $10,000 available each year for various school and living expenses. If he earns 4 percent on his money, how much must he deposit at the start of his studies to be able to withdraw $10,000 a year for three years? Table __________________pva Answer __________________ 26,400

5. Carla Lopez deposits $3,000 a year into her retirement account. If these funds have an average earning of 8 percent over the 40 years until her retirement, what will be the value of her retirement account? Table __________________fvls Answer __________________777,169.56 6. If a person spends $10 a week on coffee (assume $500 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 4 percent? Table __________________fva Answer __________________ 5,731.94 7. Tran Lee plans to set aside $1,800 a year for the next six years, earning 4 percent. What would be the future value of this savings amount? Table __________________fva Answer __________________

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