1. How much should you deposit today in order to withdraw $5,000each year for 7 years? Your first withdraw will start 5 year fromnow and your deposit will earn 4% interest.

2. Which amount is worth more today at 14% interest rate: $1,300 inhand today or $2,500 due in five years?

3. Krystal Magee invested $135,125, 17 months ago. Currently theinvestment is worth $197,234. Krystal knows that the investmentpaid interest monthly, but she does not know what yield on herinvestment. What is Krystal’s annual percentage return (APR) andEAR?

4. A 5 year girl was given a lottery ticket for her recentbirthday. The ticket was the grand prize winner and is suppose topay $80,000 per year after taxes, for 20 years. The state sued,however, and won the case arguing that it would pay the prize asagreed, but it would not begin payment until the girl reaches ageof 18 in exactly 13 years. If the appropriate discount rate is 6%annually, what is present value of the girl’s fortune?

5. Suppose you are going to buy a car. The cost of car is $20,000.You have $8,000 for down payment. You can borrow the balance of$12,000 from dealership’s finance company at 2% APR, with monthlypayment for 36 months or you can borrow from a bank with 8% APRmonthly payment for 3 years, and receive a $2,000 rebate on thepurchase price. Assume that if you take the rebate, you will applyit toward the purchase. Which alternative is better deal?

6. You are preparing a vacation to Europe in the future. You planto save $400 a month beginning today, and estimate you earn 1% permonth on your savings. Your goal is to save $6,000. How long ittake to save this amount?

7. What is present value of perpetuity of $100 per year ifappropriate discount rate is 5%? If discount rate is increased to15% what is the present value of the perpetuity?

8. Bank of Land lends you money today but requires no payments for3 years. However, during this interest deferred period the loanaccumulated interest at 6% rate, compounded quarterly. The bankamortizes the loan over five year period, requiring quarterlypayments and continuing charge 6% annual interest rate, compoundedquarterly. What will be the quarterly payment will be on today’sloan of $20,000?

9. Energy Tech company issued an 8% (semiannual payment) 20 yearbond 5 years ago. a). If the yield of similar bondtoday is 6%, what is the bond price? What is the current yield?b). If you expect company to call the bond 3 yearsfrom today and will pay the principal plus two years couponinterests as penalty what price you should pay for this bond?

10. Green Co. just paid dividend of $1 per share. The companypredicts that the dividend will increase 7% for next 5 years and 5%thereafter forever. If your required rate of return is 6%, whatprice you should pay for this company's stock?