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Problem 1 You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with eq
Problem 1
You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
Problem 2
a) Compute the future value of a 9%, 5year ordinary annuity that pays $600 each year.
b) Assume that payments are made at the beginning of the year. Find the future value using the given information from part (a)
Problem 3
You want to quit your job and go back to school for a law degree 4 years from now, and you plan to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today?
Problem 4
The APY for a savings account with a stated APR of 5% compounded daily is closest to
Problem 5
What’s the present value of a 4year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?
Problem 6
Ally wishes to leave a provision in her will that $7000 will be paid annually in perpetuity to a local charity. How much must she provide in her will for this perpetuity if the interest rate is 6%?
Problem 7
A bank offers a loan that will requires you to pay 7% interest compounded monthly. Which of the following is closest to the APY charged by the bank?
Problem 8
What is the present value of the following cash flow stream at a rate of 12.0%?
Years: 0 1 2 3 4
    
CFs: $0 $1,500 $3,000 $4,500 $6,000
Problem 9
A bank offers a home buyer a 20year loan at 8% per year. If the home buyer borrows $130,000 from the bank, how much must be repaid every year?
Problem 10
Matthew wants to take out a loan to buy a car. He calculates that he can make repayments of $5000 per year. If he can get a fouryear loan with an interest rate of 7.9%, what is the maximum price he can pay for the car?
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