Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association,, a professional organization or divorce attorneys. The membership dues for the ADLA are $800 per year an must be paid at the beginning of each year. For, instance, membersip dues for the first year are paid today, and dues for the second year are payable one year from today. However the ADLA also has an option for members to buy a lifetime membership today for $8500 and never have to pay annual membership dues.
Obviously the lifetime membership isn't a good deal if you only remain a member for a couple of years but if you remain a member for 40 years, its a great deal. Suppose that the appropriate annual interest rate is 7.6%. What is the minimum number of years that Lloyd must remain a member of the ADLA so that the lifetime membership is cheaper( on a present value basis) than paying $800 in annual membership dues?
a) 13 years, b)14 c)19 d)16
In 1626 Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the isand was about $24 worth of goods, including beads, trinkets, cloth, kettles and axe heads. Many people find it laughable that Manhatan Island would be sold for $24 but you need to consider the future value of that price in more current times. If the $24 purchase price could have been invested at 4.25 % annual interst rate, what is its value of 2012 (386 years later)?
a) 300,708,524.86
b) 193,638,065.25
c) 227,809,488.53
d) 261,980,911.81