### More Time Value of Money Practice Problems

*Prepared by Pamela Peterson Drake*
- How much must I deposit in an account today so that I can withdraw
$100 per year for four years, beginning two years from now, if my deposits
earn 5% interest, compounded annually?

- How much must I deposit in an account today so that I can withdraw
$1,000 each year for four years, my deposits earn 4% interest (compounded
annually), and my first withdrawal is ten years from today?

- How much must I deposit in an account each year starting today so
that I can withdraw $1,000 each year for four years, my deposits earn 4%
interest (compounded annually), my first withdrawal is ten years from
today, and my last deposit is nine years from today?

- Suppose Charlie borrows $100,000 today and must make monthly payments of
$3,874.81 at the end of each month for thirty months. What is the
annual percentage rate (APR) on Charlie's loan? What is the effective
annual rate (EAR) on Charlie's loan?

- Calculate the effective annual rate (EAR) on a savings account with an
annual percentage rate (APR) of 10% for the following compounding
frequencies:
- Semi-annual
- Quarterly
- Monthly
- Daily
- Continuous

Solutions