1. A diamond mine is expected to yield an annual income of $130000 for the next 18 years, after which it will be sold for $9100. An investor wants an annual return on his investment of 14%. If he can establish a sinking fund earning an annual interest rate of 7%, how much should he pay for the mine?
2. Annuities are a common form of investment? Give some examples of the most common forms of annuity. Distinguish between an annuity and a perpetuity, and comment on the difference in value where the annuity is quite long term.