## Interest rates

**Complete the following from the textbook:**

· Chapter 9: E1, P2, P3, P4, P5, P7, P16, P17, P19

· SEE DETAILED BELOW

**Chapter 9-**

**E1**. Go to the Federal Reserve website, http://www.federalreserve.gov. Go to “Economic Research and Data,” and access “Consumer Credit.” Find interest rates charged by commercial banks on new automobile loans, personal loans, and credit card plans.

- Compare the current or recent level of interest rates among the three types of loans.
- Compare trends in the cost of consumer credit provided by commercial banks over the past three years.

**E1.** PART II. Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent.

- What would be the future value if the interest rate is a simple interest rate?
- What would be the future value if the interest rate is a compound interest rate?

**P3.** Determine the future values if $5,000 is invested in each of the following situations:

- 5 percent for ten years
- 7 percent for seven years
- 9 percent for four years

**P4.** You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding.

- What would be the future value of your investment?
- Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment’s future value in terms of purchasing power?
- What would be the investment’s future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?

**P5.** Find the present value of $7,000 to be received one year from now, assuming a 3 percent annual discount interest rate. Also calculate the present value if the $7,000 is received after two years.

**P7.** **Determine the present value if $15,000 is to be received at the end of eight years and the discount rate is 9 percent. How would your answer change if you had to wait six years to receive the $15,000?**

**P16.** Use a financial calculator or computer software program to answer the following questions:

- What would be the future value of $15,555 invested now if it earns interest at 14.5 percent for seven years?
- What would be the future value of $19,378 invested now if the money remains deposited for eight years and the annual interest rate is 18 percent?

**P17.** Use a financial calculator or computer software program to answer the following questions:

- What is the present value of $359,000 that is to be received at the end of 23 years if the discount rate is 11 percent?
- How would your answer change in (a) if the $359,000 is to be received at the end of 20 years?

**P19.** Use a financial calculator or computer software program to answer the following questions.

- What would be the future value of $19,378 invested now if the money remains deposited for eight years, the annual interest rate is 18 percent, and interest on the investment is compounded semi-annually?
- How would your answer for (a) change if quarterly compounding were used?