1. Alexander Chavez is a software engineer, and developed a new software which can be used for networking. GRANT NETWORK Inc. wants to incorporate Chavezs software into its networking systems and offered $575,000 today, plus $550,000 at the end of each of the following seven years for permission to do this. If the appropriate interest rate is 7.5 percent, what is the present value of the cash flow stream that GRANT NETWORK is offering to Alexander? (30 points)

Note: You have to show all your work, including the formula to get full credit. A simple answer will not get any credit at all.

2. You borrowed $10,000 today to buy a used car from First National Bank of Chicago for five years. The bank is charging an APR (Annual Percentage Rate) of 12%. What is your monthly payment?

(30 points)

Note: You have to show all your work, including the formula to get full credit. A simple answer will not get any credit at all.

3. You are the chief financial officer of ALASKA PIPELINE. ALASKA is planning a major capital expansion project worth $1 billion, and will finance it by borrowing money for five years. Three major banks in the US have submitted interest rate quotes as follows; all are APRs:

First National Bank of North Texas: 10.40 percent compounded monthly

Tennessee Development Bank: 10.90 percent compounded annually.

Idaho Finance Inc: 10.50 percent compounded quarterly.

Which lender offers the lowest interest rate? (30 points)

Note: You have to show all your work, including the formula to get full credit. A simple answer will not get any credit at all.