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?
a) Compute the future value of a 9%, 5-year 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)
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?
The APY for a savings account with a stated APR of 5% compounded daily is closest to
What’s the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?
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%?
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?
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
A bank offers a home buyer a 20-year loan at 8% per year. If the home buyer borrows $130,000 from the bank, how much must be repaid every year?
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 four-year loan with an interest rate of 7.9%, what is the maximum price he can pay for the car?
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