Q1. If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?
Q2. What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually?
Q3. What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be?
Q4. Find the present value of the following ordinary annuities:
a. $400 per year for 10 years at 10%
b. $200 per year for 5 years at 5%
c. $400 per year for 5 years at 0%
d. Now rework, parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.
Q5. Find the present values of the following cash flow streams. The appropriate interest rate is 8%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 =0.