1. Assume you have the following situations. Using the TVM concepts (formulas or tables) calculate the correct amount in each situation.
a. You have $10,000 to invest, at 5% annually and you will keep the money invested for 10 years. What will this amount grow to?
b. You will need $15,000 in 7 years when you want to take a world cruise. If you can earn 6% annually how much do you need to invest now, in order to have the amount needed for the cruise?
c. You are working on saving for retirement. You will reach full retirement age in 20 years, and you can invest $5000 each year and can earn 7% annually during this period. How much money will you have as you enter the retirement phase of your life, from this investment?
d. What is the amount a person would have to deposit today to be able to take out $5000 a year for 10 years from an account earning 8 percent annually?
2. View the TeachMeFinance.com animated audio slide show on The Time Value of Money at
http://teachmefinance.com/timevalueofmoney.html
This slide show will walk you through an example of
how to calculate the present and future values of money. How is each part of the formula used in that
lesson equivalent to the formula presented in this text?
3. Analyze Mark’s budget as a financial planning tool for making decisions in the following situations. In each case, how will other financial planning tools affect Mark’s decisions? For each case, create a new budget showing the projected effects of Mark’s decisions.
a. A neighbor and coworker suggest that he and Mark commute to work together.
b. The roofers inform Mark that his chimney needs be to repointed and relined.
c. Marks wants to give up tutoring and put more time into his memorabilia business.
4. Review your list of financial goals. For each goal, how does the U.S. Tax Code help or hinder you in achieving it?