1. You are offered an investment with a quoted annual interest rate of 12.5% with quarterly compounding of interest. What is your effective annual interest rate?
2. You are offered an annuity that will pay $20,000 per year for 10 years (the first payment will occur one year from today). If you feel that the appropriate discount rate is 13%, what is the annuity worth to you today?
3. If you deposit $6,000 per year for 25 years (each deposit is made at the end of each year) in an account that pays an annual interest rate of 10%, what will your account be worth at the end of 25 years?