How long would it take $1,000 to double if it were invested in a
bank that pays 6 percent per year? How long would it take if the
rate were 10 percent?
Microsoft’s 2004 earnings per share were $1.04, and its growth rate
during the prior 10 years was 24.1 percent per year. If that growth
rate were maintained, how long would it take for Microsoft’s EPS to
double?
What’s the difference between an ordinary annuity and an annuity
due?
Why should you rather receive an annuity due for $10,000 per year
for 10 years than an otherwise similar ordinary annuity?
For an ordinary annuity with five annual payments of $100 and a 10
percent interest rate, how many years will the first payment earn
interest, and what will this payment’s value be at the end? Answer this
same question for the fifth payment. (4 years, $146.41; 0 years, $100)
Assume that you plan to buy a condo five years from now, and you
estimate that you can save $2,500 per year. You plan to deposit the
money in a bank that pays 4 percent interest, and you will make the
first deposit at the end of the year. How much will you have after
five years? How would your answer change if the interest rate
were increased to 6 percent, or lowered to 3 percent?
