# BUSN 380 BUSN380 Week 1 Problem Set 1 Solution

**BUSN 380 Week 1 Problem Set 1**

**(Note: Some of these problems require the use of the time value of money tables in the Chapter 1 Appendix).**

**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?**

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**2. At an annual interest rate of five percent, how long would it take for your savings to double?**

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**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?**

4. **A family spends $28,000 a year for living expenses. If prices increase by 4 percent a year for the next three years, what amount will the family need for its living expenses?**

5. **What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5 percent?**

6. **Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax return? Assumes she can earn 3 percent on her savings.**

7. **Tran Lee plans to set aside $1,800 a year for the next six years, earning 4 percent. What would be the 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 next five years, what would be the amount of each payment? (Note: Use the present value of an annuity table in the**

** Chapter 1 Appendix.)**

**9. Based on the following data, compute the total assets, total liabilities, and net worth.**

**Liquid assets, $3,670 Household assets, $89,890**

**Investment assets, $8,340Long-term liabilities, $76,230**

**Current liabilities, $2,670**

**10. Which of the following employee benefits has the greater value? Use the formula given in the “Financial Planning Calculations” – “Tax-Equivalent Employee Benefits” box found in Chapter 2 to compare these benefits. (Assume a 28 percent tax rate.)**

**A nontaxable pension contribution of $4,300 or the use of a company car with a taxable value of $6,325. **