1. Calculate the present value of annual payments of $3,000 per year for ten years at 8%.
2. How much will you have at the end of the 6th year if you invest $5,000 annually for six years at 7% annual rate.
3. How long it will take for $2,500 to become $8,865 if it is deposited and earns 5% per year compounded annually? (Calculate to the closest year.)
4. Sum the present values of the following cashflows to be received at the end of each of the next six years $1,500, $3,500, $3,750, $4,250, $5,000, $5,000 when the annual discount rate is 4%.
5..A bank agrees to give you a loan of $12,000,000 and you have to pay $1,309,908 per year (end of year) for 26 years. What is your rate of interest?
6.. Calculate the present value of each of the alternatives below, if the discount rate is 12%.
a. $45,000 today in one lump sum.
b. $70,000 paid to you in seven equal payments of $10,000 each at the end of each of the next seven years.
c. $80,000 paid in one lump sum 7 years from now.
7. You are negotiating for the terms of a legal settlement, and your opponent’s attorney has presented you with the following alternative settlement alternatives:
a. $38,000 today in one lump sum.
b. $50,000 to be paid to you in five equal payments of $10,000 at the end of each of the next five years.
c. If your discount rate is 10%, what is the present value of each of the alternatives and which alternative would you choose, and why?