Chapter 4 Financial Planning Problems

Matthew Ramirez

BNF-102-098WB

Prof. Deane

11 February 2022

1. An ATM with a service fee of $2 is used by a person 100 times in a year. What would be the future value in 10 years (use a 2 percent rate) of the annual amount paid in ATM fees?

4. For each of these situations, determine the savings amount. Use a financial calculator or the time value of money tables in the Chapter 1 appendix.

a. What would be the value of a savings account started with $700, earning 4 percent (compounded annually) after 10 years?

b. Brenda Young desires to have $15,000 eight years from now for her daughter’s college fund. If she will earn 5 percent (compounded annually) on her money, what amount should she deposit now? Use the present value of a single amount calculation.

c. What amount would you have if you deposited $1,800 a year for 30 years at 7 percent (compounded annually)?

8. A certificate of deposit often charges a penalty for withdrawing funds before the maturity date. If the penalty involves two months of interest, what would be the amount for early withdrawal on a $20,000, 5 percent CD?

11. What would be the net annual cost of the following checking accounts?

a. Monthly fee, $3.75; processing fee, 25 cents per check; checks written, an average of 14 a month.

b. Interest earnings of 4 percent with a $500 minimum balance; average monthly balance, $600; monthly service charge of $15 for falling below the minimum balance, which occurs three times a year (no interest earned in these months).

12. Based on the following information, prepare a bank reconciliation to determine adjusted (corrected) balance:

Bank balance, $680 Account fees, $12

Checkbook balance, $642 ATM withdrawals, $80

Outstanding checks, $112 Deposit in transit, $60

Direct deposits, $70 Interest earned, $8