1. You require an 8% annual return on all investments. You will receive $1,000, $2,000, and $3,000 respectively for the next three years (end of year) on a particular investment. What is the most you would be willing to pay for this investment?
a. $5,022
b. $2,577
c. $6,000
d. $4,763
2. A perpetuity can be described as:
a. an annuity that lasts longer than 25 years
b. an amount of interest that is annually adjusted up or down and is paid forever
c. an annuity that goes on forever
d. principal that is repaid after 100 years
3. You would like to have $500,000 in 20 years for your retirement. You plan to put away $14,000 each year (end of year). What is the minimum interest rate that you would need to receive $500,000?
a. 6.5%
b. 5.72%
c. 5%
d. 4.5%