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Present Value and Multiple Cash Flows. What is the present value of $2,150 per year, at a discount rate of 9 percent, if the first payment is received 6 years from now and the last payment is received 20 years from now?
Calculating Annuity Values. If you deposit $5,000 at the end of each of the next 20 years into an account paying 10.8 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years?
Calculating Perpetuity Values. Curly’s Life Insurance Co. is trying to sell you an investment that will pay you and your heirs $25,000 per year forever. If the required return on this investment is 6 percent, how much will you pay for the policy?
Calculating EAR. First National Bank charges 10.9% compounded monthly on its business loans. First United Bank charges 11.1% compounded semiannually. As a potential borrower, which bank would you go for a new loan?