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WEEK 6 HOMEWORK Show your work on all your responses 1 Find the future value one year from now of a $7,000 investment at a 3 percent annual compound interest rate. Also calculate the future value if the investment is made for two years. 2. Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent. a. What would be the future value if the interest rate is a simple interest rate? b. What would be the future value if the interest rate is a compound interest rate? 3. Find the present value of $7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present vale if the $7,000 is received after two years. 4. Determine the future value at the end of two years of an investment of S3,000 made now and an additional $3,000 made one year from now if the compound annual interest rate is 4 percent 5. Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent. 6. Determine the future values if $5,000 is invested in each of the following situations: a 5 percent for ten years b. 7 percent for seven years c. 9 percent for four years 7. You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding What would be the future value of your investment? b. Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment's FV in terms of purchasing power? What would be the investment's future value in terms of purchasing power if inflation occurs at a 9 percent annual rate? 8. Answer the following questions. a. What is the annual percentage rate (APR) on a loan that charges interest of 75 percent per month b. What is the effective annual rate (EAR) on the loan described in (a)? 9. You have recently seen a credit card advertisement that states that the annual percentage rate is 12 percent. If the credit card requires monthly payments, what is the effective annual rate of interest on the loan? 10. A credit card advertisement states that the annual percentage rate is 21 percent. If the credit card requires quarterly payments, what is the effective annual rate of interest on the loan

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