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132. What is the value in year 10 of a $1,000 cash flow made in year 5 if interest rates are 9
percent in years 6 and 7 and increase to 13 percent in the remaining years?
133. What is the value in year 4 of a $9,000 cash flow made in year 13 if interest rates are 7
percent in years 4 through 9 and increase to 11 percent after that?
134. What is the value in year 6 of a $9,000 cash flow made in year 14 if interest rates are 7
percent in years 4 through 9 and increase to 10 percent after that?
135. What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15
percent in years 6 through 13 and increase to 18 percent in the remaining years?
136. A $2 million deposit earns 7 percent for 13 years. If the account earns 9 percent per year
forever after that, how long will it take to grow to $5 million?
137. A $7 million deposit earns 5 percent for 9 years. If the account loses 2 percent per year
after that, how long will it take to be reduced back to $7 million?
138. You deposit $20,000 in an account that doubles in 7 years. How many years will it take
the account to be reduced to its original value if it loses 12 percent per year?
139. You deposit $20,000 in an account that doubles in 7 years. How many years will it take
the account to double again if it earns 14 percent per year?
140. Time value of money concepts can be used by:
141. How much would be in your savings account in 12 years if you deposited $1,500 today?
Assume the bank pays 5 percent per year.
142. An average home in Chicago costs $295,000. If house prices are expected to grow at an
average rate of 3 percent per year, what will a house cost in 5 years?
143. If an average home in your town currently costs $250,000, and house prices are expected
to grow at an average rate of 3 percent per year, what will a house cost in 8 years?
144. You are offered a choice between $770 today and $815 one year from today. Assume that
interest rates are 4 percent. Which do you prefer?
145. Show the time line for a $1000 cash inflow today, a $1262.48 cash outflow in year 4, and
a 6 percent interest rate.
146. Show the time line for a $300 cash outlay today, a $483.15 inflow in year 5, and a 10
percent interest rate.
147. What would be more valuable, receiving $1,000 today or receiving $3,000 in 10 years
when interest rates are 8 percent? Why?
148. Say you double your money in five years. Explain why the rate of return is NOT 20 percent
per year.
149. Explain why the Rule of 72 is less accurate with higher interest rates.
150. Explain how "interest rate" and "rate of return" are similar, yet different.
151. Why is a dollar worth more today than a dollar received one year from now?
152. How does compounding help build wealth (or increase debt) over time?
153. Explain how discounting is the reverse of compounding.
