Problem 1
You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
Problem 2
a) Compute the future value of a 9%, 5-year ordinary annuity that pays $600 each year.
b) Assume that payments are made at the beginning of the year. Find the future value using the given information from part (a).
Problem 3
You want to quit your job and go back to school for a law degree 4 years from now, and you plan to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today?
Problem 4
The APY for a savings account with a stated APR of 5% compounded daily is closest to ________.
A) 5.64%
B) 6.15%
C) 5.13%
D) 6.66%
Problem 5
What's the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?
Problem 6
Ally wishes to leave a provision in her will that $7000 will be paid annually in perpetuity to a local charity. How much must she provide in her will for this perpetuity if the interest rate is 6%?
Problem 7
A bank offers a loan that will requires you to pay 7% interest compounded monthly. Which of the following is closest to the APY charged by the bank?
Problem 8
What is the present value of the following cash flow stream at a rate of 12.0%?
|
Years:
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0
|
1
|
2
|
3
|
4
|
|
CFs:
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$ 0
|
$ 1,500
|
$ 3,000
|
$ 4,500
|
$ 6,00
|
Problem 9
A bank offers a home buyer a 20-year loan at 8% per year. If the home buyer borrows $130,000 from the bank, how much must be repaid every year?
Problem 10
Matthew wants to take out a loan to buy a car. He calculates that he can make repayments of $5000 per year. If he can get a four-year loan with an interest rate of 7.9%, what is the maximum price he can pay for the car?