Q1. John Deere sells a tractor for $200,000 which is due in 4 years. What is the present value of this one time payment if the annual interest rate is 8%?
A. $147,006
B. $272,098
C. $200,000
D. $50,000
Q2. Professor Wolfe would like to go on a European vacation in 5 years and estimates she'll need $20,000. What amount should she invest today in order to have $20,000 in 5 years assuming she will earn 4% in interest annually.
A. $4,000
B. $16,439
C. Can't Professor Wolfe figure this out for herself?
D. $20,000
Q3. Prof Wolfe would like to retire today. She would like to receive $50,000 per year for the next 10 years before she starts receiving her social security. How much does she have to invest today assuming she will earn 6% interest annually
A. $368,000
B. $500,000
C. $217,750