1. Dynamics Telecommunications Corporation has made an investment in another company that will guarantee it a cash flow of $22,500 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment?
2. Cecelia Thomas is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $3,000 every year in a retirement account, beginning at the end of this year until she turns 65 years old. If the investment will earn 9.75 percent annually, how much will she have in 40 years, when she turns 65?
3. The Elkridge Bar and Grill has a seven-year loan in the amount of $25,000 with Bank of America. It plans to repay the loan in seven equal installments made at the end of each year. If the rate of interest is 8.0 percent, how much will each payment be?
4. Anna Kashfi is retiring at the end of next year. She would like to make sure she receives payments of $10,000 a year forever, starting when she retires. If she can earn 6.5 percent annually, how much does Anna need to invest to produce the desired cash flow?
5. Anna Kashfi (from above) is retiring at the end of next year. She would like to make sure she receives payments of $10,000 a year forever, starting when she retires, but now she would like these payments to grow by 1.5 percent each year. If she can earn 6.5 percent annually, how much does Anna need to invest to produce the desired cash flow?
6. Sharon Kabana won the state lottery and will receive a payment of $89,729.45 at the end of each year for the next 20 years. If the going rate of interest is 7.25 percent, what is the present value of her lottery winnings?
7. What is the present value of Sharon Kabana's lottery winnings (above) if the payments begin today instead of one year from today?
8. If the APR is 9.65 percent, what is the effective annual interest rate (EAR), in percent, if the compounding is quarterly?
9. Assume you will start working as soon as you graduate from college. You plan to start saving for your retirement on your 25th birthday and retire on your 65th birthday. After retirement, you expect to live until you are at least 85. You wish to be able to withdraw $50,000 every year from the time of your retirement until you are 85 years old (i.e., for 20 years). What is the dollar amount you need to invest every year, starting at age 26 and ending at age 65 (i.e., for 40 years), to be able to accomplish this plan if the interest rate is 10 percent?