1.You are head of the Schwartz Family Endowment for the Arts. You have decided to fund an arts school in the San Francisco Bay area in perpetuity. Every five years, you will give the school $1 million. The first payment will occur five years from today. If the interest rate is 8% per year,what is the present value of your gift?
2.When you purchased your house, you took out a 30-year annual-payment mortgage with an interest rate of 6% per year. The annual payment on the mortgage is $12,000. You have just made a payment and have now decided to pay the mortgage off by repaying the outstanding balance. What is the payoff amount if
a. You have lived in the house for 12 years (so there are 18 years left on the mortgage)?
b. You have lived in the house for 20 years (so there are 10 years left on the mortgage)?
c. You have lived in the house for 12 years (so there are 18 years left on the mortgage) and you decide to pay off the mortgage immediately before the twelfth payment is due?