1. How much would you be willing to pay for an investment that paid $100 monthly forever if your opportunity cost is 10%?
2. If you start TODAY depositing $100 per month, and continue to do so each month for the next 20 years, in an account that pays 8% interest compounded monthly, how much will you have in 20 years?
3. You just looked at your last credit card statement and saw APR = 21%. You’re required to make monthly payments. What is the ‘periodic rate’ you’re paying? What is the EAR they’re charging?
4. You need to borrow some money today from your aged father, and because you’re going to rapidly advance in your job, you can make payments like this: 1st year: $1,000, 2nd year: $2,000, 3rd year: $3000, 4th year: $4000, 5th year: $5000. Your dad says that he’s getting 4% on his CDs, compounded annually, and you’ll need to pay him the same rate. How much can you borrow?