Using the Rule of 72. Using the rule of 72, approximate the following amounts. If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double? If you earn 10 percent on your investments, how long will it take for your money to double? At an annual interest rate of 5 percent, how long will it take for your savings to double? a.) 12 years b.) 7.2 c.) 14.4 Computing Future Living Expenses. A family spends $46,000 a year for living expenses. If prices increase by 2 percent a year for the next three years, what amount will the family need for their living expenses after three years? $48,815.57 Calculating Earnings on Savings.What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 2.5 percent? $150 Computing the Time Value of Money. Using a financial calculator, calculate the following. The future value of $450 six years from now at 7 percent. The future value of $900 saved each year for 10 years at 8 percent. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years from now. The amount a person would have to deposit today to be able to take out $600 a year for 10 years from an account earning 8 percent. a.) $675.33 b.) $1997.68 c.) $747.26 d.) $2,779.16 Calculating the Time Value of Money for Savings Goals.If you desire to have $20,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 4 percent. $20,000 x 0.784 = $15,680 Using the Time Value of Money for Retirement Planning.Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9 percent over the 40 years until her retirement, what will be the value of her retirement account? $3,400 x 337.882 = $94,228.26 Calculating the Value of Reduced Spending.If a person spends $15 a week on coffee (assume $750 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent? $750 x 11.464 = $8,598 Calculating the Potential Future Value of Savings.Tran Lee plans to set aside $2,400 a year for the next six years, earning 4 percent. What would be the future value of this savings amount? $2,400 x 6.633

Using the Rule of 72. Using the rule of 72, approximate the following amounts. If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double? If you earn 10 percent on your investments, how long will it take for your money to double? At an annual interest rate of 5 percent, how long will it take for your savings to double? a.) 12 years b.) 7.2 c.) 14.4 Computing Future Living Expenses. A family spends $46,000 a year for living expenses. If prices increase by 2 percent a year for the next three years, what amount will the family need for their living expenses after three years? $48,815.57 Calculating Earnings on Savings.What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 2.5 percent? $150 Computing the Time Value of Money. Using a financial calculator, calculate the following. The future value of $450 six years from now at 7 percent. The future value of $900 saved each year for 10 years at 8 percent. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years from now. The amount a person would have to deposit today to be able to take out $600 a year for 10 years from an account earning 8 percent. a.) $675.33 b.) $1997.68 c.) $747.26 d.) $2,779.16 Calculating the Time Value of Money for Savings Goals.If you desire to have $20,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 4 percent. $20,000 x 0.784 = $15,680 Using the Time Value of Money for Retirement Planning.Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9 percent over the 40 years until her retirement, what will be the value of her retirement account? $3,400 x 337.882 = $94,228.26 Calculating the Value of Reduced Spending.If a person spends $15 a week on coffee (assume $750 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent? $750 x 11.464 = $8,598 Calculating the Potential Future Value of Savings.Tran Lee plans to set aside $2,400 a year for the next six years, earning 4 percent. What would be the future value of this savings amount? $2,400 x 6.633

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Using the Rule of 72. Using the rule of 72, approximate the following amounts.

If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double?
If you earn 10 percent on your investments, how long will it take for your money to double?
At an annual interest rate of 5 percent, how long will it take for your savings to double?

a.) 12 years

b.) 7.2

c.) 14.4

Computing Future Living Expenses. A family spends $46,000 a year for living expenses. If prices increase by 2 percent a year for the next three years, what amount will the family need for their living expenses after three years?

$48,815.57

Calculating Earnings on Savings.What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 2.5 percent?

$150

Computing the Time Value of Money. Using a financial calculator, calculate the following.

The future value of $450 six years from now at 7 percent.
The future value of $900 saved each year for 10 years at 8 percent.
The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years from now.
The amount a person would have to deposit today to be able to take out $600 a year for 10 years from an account earning 8 percent.

a.) $675.33

b.) $1997.68

c.) $747.26

d.) $2,779.16

Calculating the Time Value of Money for Savings Goals.If you desire to have $20,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 4 percent.

$20,000 x 0.784

= $15,680

Using the Time Value of Money for Retirement Planning.Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9 percent over the 40 years until her retirement, what will be the value of her retirement account?

$3,400 x 337.882

= $94,228.26

Calculating the Value of Reduced Spending.If a person spends $15 a week on coffee (assume $750 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent?

$750 x 11.464

= $8,598

Calculating the Potential Future Value of Savings.Tran Lee plans to set aside $2,400 a year for the next six years, earning 4 percent. What would be the future value of this savings amount?

$2,400 x 6.633

= $15,919.20

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