Accounting after WWII
End of Chapter Answers
Chapter 1
1. Using the rule of 72, approximate the following amounts. (Obj. 1)
a. If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double?
About 12 years (72 / 6)
b. If you earn 10 percent on your investments, how long will it take for your money to double?
About 7.2 years (72 / 10)
c. At an annual interest rate of 5 percent, how long will it take for your savings to double?
About 12 years (72 / 5)
2. In the early 2000s, selected automobiles had an average cost of $15,000. The average cost of those same automobiles is now $18,000. What was the rate of increase for these automobiles between the two time periods?
($18,000 ‑ $15,000) / $15,000 = .20 (20 percent)
3. A family spends $34,000 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 their living expenses after three years?
$34,000 1.12 = $38,080; or using Exhibit 1-A: $34,000 1.125 = $38,250
4. Ben Collins plans to buy a house for $120,000. If that real estate is expected to increase in value by 5 percent each year, what will its approximate value be seven years from now?
$120,000 1.35 = $162,000; or using Exhibit 1-A: $120,000 1.407 = $168,840
5. What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5 percent?
$6,000 0.055 = $330
6. Using time value of money tables (Exhibit 1–3 or chapter appendix tables), calculate the following:
a. The future value of $450 six years from now at 7 percent.
$450 1.501 = $675.45 (Exhibit 1-A)
b. The future value of $800 saved each year for 10 years at 8 percent.
$800 14.487 = $11,589.60 (Exhibit 1-B)
c. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years from now.
$1,000 .747 = $747 (Exhibit 1-C)
d.
Chapter 1
1. Using the rule of 72, approximate the following amounts. (Obj. 1)
a. If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double?
About 12 years (72 / 6)
b. If you earn 10 percent on your investments, how long will it take for your money to double?
About 7.2 years (72 / 10)
c. At an annual interest rate of 5 percent, how long will it take for your savings to double?
About 12 years (72 / 5)
2. In the early 2000s, selected automobiles had an average cost of $15,000. The average cost of those same automobiles is now $18,000. What was the rate of increase for these automobiles between the two time periods?
($18,000 ‑ $15,000) / $15,000 = .20 (20 percent)
3. A family spends $34,000 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 their living expenses after three years?
$34,000 1.12 = $38,080; or using Exhibit 1-A: $34,000 1.125 = $38,250
4. Ben Collins plans to buy a house for $120,000. If that real estate is expected to increase in value by 5 percent each year, what will its approximate value be seven years from now?
$120,000 1.35 = $162,000; or using Exhibit 1-A: $120,000 1.407 = $168,840
5. What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5 percent?
$6,000 0.055 = $330
6. Using time value of money tables (Exhibit 1–3 or chapter appendix tables), calculate the following:
a. The future value of $450 six years from now at 7 percent.
$450 1.501 = $675.45 (Exhibit 1-A)
b. The future value of $800 saved each year for 10 years at 8 percent.
$800 14.487 = $11,589.60 (Exhibit 1-B)
c. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1,000 five years from now.
$1,000 .747 = $747 (Exhibit 1-C)
d.