1. In the efforts to shore up its image by promoting “corporate social responsibility and good citizen” (hoping to increase its market share, too!), a major local corporation decides to donate $2,000,000 to support the activity of a consortium of local charity organizations. If the consortium can invest the donated money in a Treasury security that yields a guaranteed annual rate of return of 2.5%, what is the amount that the organization would be able to draw out each year, forever?
2. BTU Inc. is thinking of purchasing a house. The house costs $350,000. The firm has $50,000 in cash that it can use as a down payment on the house, but it needs to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. What will the firm’s annual payment be if it signs up for this mortgage?