1. A 5 year girl was given a lottery ticket for her recent birthday. The ticket was the grand prize winner and is suppose to pay $80,000 per year after taxes, for 20 years. The state sued, however, and won the case arguing that it would pay the prize as agreed, but it would not begin payment until the girl reaches age of 18 in exactly 13 years. If the appropriate discount rate is 6% annually, what is present value of the girl’s fortune?
2. 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 monthly payment for 36 months or you can borrow from a bank with 8% APR monthly payment for 3 years, and receive a $2,000 rebate on the purchase price. Assume that if you take the rebate, you will apply it toward the purchase. Which alternative is better deal?
3. You are preparing a vacation to Europe in the future. You plan to save $400 a month beginning today, and estimate you earn 1% per month on your savings. Your goal is to save $6,000. How long it take to save this amount?
Looking for help on the base set-ups of these equations. Need to be able to figure out without using excel or finance calculator.