E6-2 (Simple and Compound Interest Computations) LyleO’Keefe invests $30,000 at 8% annual
interest, leaving the money invested without withdrawing any of theinterest for 8 years. At the end of
the 8 years, Lyle withdrew the accumulated amount of money.
Instructions
(a) Compute the amount Lyle would withdraw assuming the investmentearns simple interest.
(b) Compute the amount Lyle would withdraw assuming the investmentearns interest compounded
annually.
(c) Compute the amount Lyle would withdraw assuming the investmentearns interest compounded
semiannually.
E6-5 (Computation of Present Value) Using the appropriateinterest table, compute the present valuesof the followingperiodic amounts due at the end of the designated periods.
(a) $50,000 receivable at the end of each period for 8 periodscompounded at 12%.
(b) $50,000 payments to be made at the end of each period for 16periods at 9%.
(c) $50,000 payable at the end of the seventh, eighth, ninth, andtenth periods at 12%.
E6-6 (Future Value and Present Value Problems) Presentedbelow are three unrelated situations.
(a) Ron Stein Company recently signed a lease for a new officebuilding, for a lease period of 10 years.
Under the lease agreement, a security deposit of $12,000 is made,with the deposit to be returned
at the expiration of the lease, with interest compounded at 10% peryear. What amount will the
company receive at the time the lease expires?
and so on …
E6-8 (Computations for a Retirement Fund) Stephen Bosworth,a super salesman contemplating
retirement on his fifty-fifth birthday, decides to create a fund onan 8% basis that will enable him to
withdraw $25,000 per year on June 30, beginning in 2014 andcontinuing through 2017. To develop this
fund, Stephen intends to make equal contributions on June 30 ofeach of the years 2010–2013.
Instructions
(a) How much must the balance of the fund equal on June 30, 2013,in order for Stephen Bosworth
to satisfy his objective?
(b) What are each of Stephen’s contributions to the fund?
E6-10 (Unknown Periods and Unknown Interest Rate) Considerthe following independent situations.
(a) Mark Yoders wishes to become a millionaire. His money marketfund has a balance of $148,644
and has a guaranteed interest rate of 10%. How many years must Markleave that balance in the
fund in order to get his desired $1,000,000?
(b) Assume that Elvira Lehman desires to accumulate $1 million in15 years using her money market
fund balance of $239,392. At what interest rate must Elvira’sinvestment compound annually?
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