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  3. 6. your salary next year is expected to be $40,000

6. Your salary next year is expected to be $40,000. Assume you expect your salary...

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Accounting

6. Your salary next year is expected to be $40,000. Assume you expect your salary to grow at a steady rate of 4% per year for another 25 years. If the appropriate cost of capital (aka discount rate) is 9%, what is the PV today of your future salary cashflow stream? [For simplicity, assume the salary amounts are at the end of each of the next 25 years.] Answer to nearest $1000.

246,000

247,000

391,000

553,000

800,000

7. Chrysler is offering a choice of either 48 month 2.0% APR financing, OR $2000 cash back if you pay "cash" on a car purchase. The stated price is $25,000. If you can obtain bank financing at 5.75% APR (monthly compounding), what would be the implied monthly loan payments if use your bank for financing and thus drop the price by the $2000 cash rebate? Assume 48 month term for the bank loan also.

815

2168

616

538

insufficient information to compute

8. You are offered the opportunity to buy a note for $10,000. The note is certain to pay $2000 at the end of each of the next 10 years. If you buy the note, what rate of interest will you receive on this investment (to nearest %)

15%

100%

20%

16%

insufficient information to compute

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