15. Forever Furniture has a “Don’t Pay For One Year” event on right now at the store, so you purchase an Italian
hand-stitched leather sofa. You will pay $1,369 for the sofa in one year. Forever Furniture charges 18.0%
annual interest compounded monthly on overdue payments. If you forget and don’t pay for the sofa until 6
months after payment is due, how much will you pay for the sofa at that time if interest charges begin on the
first day after the year is over?
16. Four years ago, Penny invested $7,500 and locked in a 4.25 percent annual interest rate for 24 years (end 20
years from now). Leonard can make a twenty year investment today and lock in a 5.65 percent interest rate.
How much money should he invest now in order to have the same amount of money in 20 years as Penny?
17. Your current investment will mature in 2 years for $20,000, at which time you will reinvest the funds for 12
more years at 5.85% per year. What will be the value of your investment at the end of the 14th year?
18. $1,500 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and $3,300 is
received at the beginning of year 3. If these cash flows are deposited at 9.75 percent, their combined future
value at the end of year 3 is:
19. You are scheduled to receive a $7,500 cash flow in two years, pay a $2,500 payment in three years receive
a $12,750 cash flow in four years, and pay a $4,250 payment in five years. If interest rates are 4.75% per
year, what is the combined present value of these cash flows?
20 How many years will it take $100,000 to grow to $350,000 with an annual interest rate of 7.25 percent?
(Hint: See Footnote 4 on page 94; ln = natural log)
A. 15 years, 3 months
B. 15 years, 8 months
C. 16 years, 4 months
D. 17 years, 2 months
E. 17 years, 11 months