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89. Scenario A: At age 19 you invest $1,500 that earns 8 percent per year. Scenario B: At age
30 you invest $1,500 that earns 13 percent per year. Under which scenario would you have more
money at age 55 and what is the dollar difference at age 55 between the two scenarios?
90. You invested $2,000 in the stock market one year ago. Today, the investment is valued at
$9,500. What return did you earn? What return would you need to suffer next year for your
investment to be valued at the original $2,000?
91. You invested $1,400 in the stock market one year ago. Today the investment is valued at
$1,100. What return did you earn? What return would you need to get back next year to break
even overall?
92. What annual rate of return is earned on a $13,000 investment made in year 2 when it
grows to $17,000 by the end of year 7?
93. What annual rate of return is implied on a $5,000 loan taken next year when $7,700 must
be repaid in year 8?
94. You just won the lottery and after taxes you have $32,000. You want to have $1,000,000
by the time you are 65, which is 45 years from now. Assuming that you can earn 9 percent each
on your money, how much (in dollars) of the $32,000 must you invest today?
95. Ten years ago, Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years
(end 20 years from now). Aidan can make a 20-year investment today and lock in an 8 percent
rate. How much money should he invest now in order to have the same amount of money in 20
years as Hailey?
96. You are scheduled to
receive
a $750 cash flow in one year, a $1,000 cash flow in two
years, and
pay
a $300 payment in four years. If interest rates are 6 percent per year, what is the
combined present value of these cash flows?
97. You are scheduled to
pay
a $350 cash flow in one year, and
receive
a $1,000 cash flow in
years 3 and 4. If interest rates are 10 percent per year, what is the combined present value of
these cash flows?
98. As the production manager of HPG, Inc., you have received an offer from the supplier who
provides the wires used in headsets. Due to poor planning, the supplier has an excess amount of
wire and is willing to sell $750,000 worth for only $600,000. You already have one year's supply of
wire on hand. This new wire would be used one year from today. What implied interest rate would
your firm be earning if you purchased the wire?
99. An appliance store sells a TV for $1,200 and gives their customers a full three years to
pay for the TV. If interest rates are 5 percent, what is the equivalent sales price of the TV when
the customer takes the full 3 years to pay for it?
100. Assume you borrow $5,000 today and pay back the loan in one lump sum four years from
today. You are charged 8 percent interest per year. What amount will you pay back and how
much interest will you pay?
101. Assume that you borrow $2,000 from your sister and that you will pay her back in one
lump sum. She charges you 9 percent interest in year 1 and increases the rate by 1 percent per
year until the loan is paid off. How much will you owe if you wait until year 3 to pay off the loan?
102. Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of
$75 in advance (today) and one year from now you need to repay $750. What implied interest rate
are you paying?
103. Assume you borrow $100 from a payday lender. The terms are that you must pay a fee of
$25 in advance (today) and one year from now you need to repay $112. What implied interest rate
are you paying?
104. Five years ago, sales were $4 million. Today your company's sales are $10 million. What
annual rate have sales been growing?
105. How long will it take for the purchasing power of $1 to be cut in half if inflation is 4
percent?
106. You have $100,000 in your account. Assuming no additional deposits are made and your
account earns 15 percent per year, how long will it take for the account to have a balance of
$500,000?
107. You have $50,000 in your account. Assuming no additional deposits are made and your
account earns 8 percent per year, how long will it take for the account to have a balance of
$500,000?
108. Which of the following statements is correct?
109. You double your money in 5 years. The reason your return is not 20 percent per year is
because:
