Question 1

Calculate the present value of annual payments of $3,000 per year for ten years at 8%.

Question 2

How much will you have at the end of the 6th year if you invest $5,000 annually for six years at 7% annual rate.

Question 3

How long it will take for $2,500 to become $8,865 if it is deposited and earns 5% per year compounded annually? (Calculate to the closest year.)

Question 4

Sum the present values of the following cashflows to be received at the end of each of the next six years $1,500, $3,500, $3,750, $4,250, $5,000, $5,000 when the annual discount rate is 4%.

Question 5

A bank agrees to give you a loan of $12,000,000 and you have to pay $1,309,908 per year (end of year) for 26 years. What is your rate of interest?

Question 6

Calculate the present value of each of the alternatives below, if the discount rate is 12%.

a. $45,000 today in one lump sum.

b. $70,000 paid to you in seven equal payments of $10,000 each at the end of each of the next seven years.

c. $80,000 paid in one lump sum 7 years from now.

Question 7

You are negotiating for the terms of a legal settlement, and your opponents attorney has presented you with the following alternative settlement alternatives:

A)$38,000 today in one lump sum.

B) $50,000 to be paid to you in five equal payments of $10,000 at the end of each of the next five years.

If your discount rate is 10%, what is the present value of each of the alternatives and which alternative would you choose, and why?