BUSN 380 DEVRY WEEK 1 PROBLEM SET 1
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<strong>BUSN</strong> <strong>380</strong> <strong>DEVRY</strong> <strong>WEEK</strong> 1 <strong>PROBLEM</strong> <strong>SET</strong> 1<br />
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<strong>BUSN</strong> <strong>380</strong> DeVry Week 1 Problem Set 1<br />
<strong>BUSN</strong><strong>380</strong><br />
<strong>BUSN</strong> <strong>380</strong> DeVry Week 1 Problem Set 1<br />
Problem Set 1 (Note: Some of these problems require the use of the time value of money tables in the<br />
Chapter 1 Appendix).<br />
1. Ben Collins plans to buy a house for $65,000. If that real estate property is expected to increase in<br />
value 5 percent each year, what would its approximate value be seven years from now?<br />
2. At an annual interest rate of five percent, how long would it take for your savings to double?<br />
3. In the mid-1990s, selected automobiles had an average cost of $12,000. The average cost of those<br />
same motor vehicles is now $20,000. What was the rate of increase for this item between the two time<br />
periods?<br />
4. A family spends $28,000 a year for living expenses. If prices increase by 4 percent a year for the next<br />
three years, what amount will the family need for its living expenses?<br />
5. What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5<br />
percent?<br />
6. Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60<br />
for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax return?<br />
Assumes she can earn 3 percent on her savings.<br />
7. Tran Lee plans to set aside $1,800 a year for the next six years, earning 4 percent. What would be the<br />
future value of this savings amount?
8. If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal payments at the end of the<br />
next five years, what would be the amount of each payment? (Note: Use the present value of an annuity<br />
table in the Chapter 1 Appendix.)<br />
9. Based on the following data, compute the total assets, total liabilities, and net worth. Liquid assets,<br />
$3,670 Household assets, $89,890 Investment assets, $8,340 Long-term liabilities, $76,230 Current<br />
liabilities, $2,670<br />
10.Which of the following employee benefits has the greater value? Use the formula given in the<br />
“Financial Planning Calculations” – “Tax-Equivalent Employee Benefits” box found in Chapter 2 to<br />
compare these benefits. (Assume a 28 percent tax rate.)<br />
A nontaxable pension contribution of $4,300 or the use of a company car with a taxable value of $6,325.