1) What is the present value of an annuity of $500 per year (first cash flow occurs one year from today) for 26 years if the interest rate is 17 % p.a.? 2) What is the future value of an annuity of $150 per year (first cash flow occurs one year from today) for 19 years if the interest rate is 14 % p.a.? 3) If the price of a loaf of bread has tripled over the past 28 years, what has been the annual rate of inflation in the price of bread over that time period?
4) You are about to deposit $595 into one of the following savings accounts to be left on deposit for 25 years. Each bank offers an account with a different interest rate and compounding period. Assuming you want to maximize your wealth, how much money would be in the bank account that offers the best effective rate of return after 25 years?
BANK A: 9.5 percent rate compounded semi-annually
BANK B: 9.4 percent rate compounded monthly
BANK C: 9.3 percent rate compounded
BANK D: 9.2 percent rate compounded continuously
5) Assume you are to receive a 10-year annuity with annual payments of $ 366 . The first payment will be received today (that is, at t = 0) and the last payment will be received at the end of Year 9 (that is, at t =9). You will invest each payment in an account that pays 16 percent. What will be the value in your account at the end of Year 20?