(Note: Some of these problems require the use of the time value of money tables in the Chapter 1 Appendix, pp. 36-39).
1. Ben Collins plans to buy a house for $65,000. If that real estate property is expected to increase in value 5 percent each year, what would its approximate value be seven years from now?
2. Using the rule of 72, approximate the following:
a. If land in an area is increasing six percent a year, how long will it take for property values to double?
b. If you earn ten percent on your investments, how long would it take for your money to double?
3. In the mid-1990s, selected automobiles had an average cost of $12,000. The average cost of those same motor vehicles is now $20,000. What was the rate of increase for this item between the two time periods?
8. If you desire to have $20,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 5 percent.
12. A financial company that advertises on television will pay you $60,000 now in exchange for annual payments of $10,000 that you are expected to receive for a legal settlement over the next 10 years. If you estimate the time value of money at 10 percent, would you accept this offer?
3. Using the goals sheet passed out in class, or on the Personal Financial Planner (PFP) on my website, create 3 short-term and 3 long-term financial goals.
5. Use library resources, such as *The Wall Street Journal*, www.businessweek.com, or other Web sites to determine recent trends in interest rates, inflation, and other economic indicators. Information about the consumer price index (measuring changes in the cost of living) may be obtained at www.bls.gov. Be prepared to report in class how this economic information might affect your financial planning decisions.
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