Reference no: EM132600078

Question 1: In May 2015, an 84-year-old woman invested $10 in five Powerball lottery tickets and won a record $590.5 million. We suspect that she received unsolicited congratulations, good wishes, and requests for money from dozens of more or less worthy charities, relations, and newly devoted friends. In response, she could fairly point out that the prize wasn't really worth $590.5 million. That sum was to be paid in 30 equal semiannual installments of $9.8415 million each. Assuming that the initial payment occurred at the end of one year, what was the present value of the prize? The interest rate at the time was about 3.6%.

Question 2: Bank loans are paid off in equal installments. Suppose that you take out a four-year loan of $5000. The bank requires you to repay the loan evenly over the four years on monthly basis. The Effective annual rate bank charges are 6.3%. (Marks 4)

What is monthly payment of installment?

Construct a monthly amortization schedule of $5000 loan to be paid over 4 years?

What sense you could make from the relationship between interest and principle paid over?

How is total interest paid over 4 years?

Question 3: Ten years ago, Tala's invested $2,000 and locked in a 9 percent annual interest rate for 40 years (end 25 years from now). Jassem's can make a 25-year investment today and lock in a 7 percent interest rate. How much money should he invest now in order to have the same amount of money in 25 years as Tala's?