(1) (Monthly compounding) How much
would you have to invest today at 12% annual interest, compounded monthly, in
order to end up with $1,000 in your investment account at the end of 12 months?
(2) (Annualizing a rate) The
effective annual rate (EAR) of 1% interest per month is:
(3) (Annualizing a rate) Your bank
advertises 12 month CDs with a stated annual interest rate of 12%, compounded
monthly. What is the effective annual rate (EAR) on the CD?
(4)
(PV of annuity due) You are in charge of a new
Missouri State Lottery. The lottery rules say that winners are to be paid $10
million in the form of 10 annual payments of $1 million each. Assuming that the
interest rate is 10% and the payments are to be made at the beginning of each
of the next 10 years, how much money does your lottery organization have to
deposit in an account today in order to make the required payments to a lottery
winner?
(5) (Rate of return of annuity) If
the Bank of America agreed to lend you $50,000 for 10 years in return for 10
annual payments of $7,791 (each payment due at the end of each year), what
annual percent rate of interest are you being charged?
(6) (Rate of return of annuity) Joe's
Dockyard is financing a new boat with an amortizing loan of $24,000 which is to
be repaid in 10 annual installments of $4,247.62 each. What annual interest
rate is Joe paying on the loan?
(7) (Loan payments) Tom's Toyotas has
a 2004 4 Runner on sale for $16,995. If you could borrow that amount from Tom's
Credit Union at 7% for 4 years, what would be your monthly loan payments?
(8) (PV of a perpetuity) The PV of an
endless stream of annual payments (the payments in the stream continue to be
paid forever) of $1,200 each to an investor with a required rate of return of
10% is:
(9) (FV of an uneven cash flow
stream) What's the future value (FV) of the following cash flow stream:
(discount rate = 10%) Year Cash Flow 1 100 2 200 3 300
(10) (PV of uneven cash flow stream) What's the present
value (PV) of the following cash flow stream: (discount rate = 10%) Year Cash
Flow 1 100 2 200 3 300
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