Reference no: EM133120748

1. At retirement, a client has two payment options: a 20-year annuity at €50,000 per year starting after one year or a lump sum of €500,000 today.  If the client's required rate of return on retirement fund investments is 6% per year, which plan has the higher present value and by how much?
2. CelebNav had sales last year of $700,000, and the analysts are predicting strong future performance for the start-up, with sales growing 20% a year for the next 3 years. After that, the sales should grow 11% per year for 2 years, at which time the owners are planning on selling the company. What is the expected value of those cash flows at the end of 5 years? 
3. Samir bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the dealer at an APR of 4.9% for 4 years. What is the effective annual interest rate (EAR) if the loan payments are made monthly (try using the EAR formula 1^st, then use EFFECT)? What is his monthly payment? How much total interest will he pay on the loan if he does not pay off the loan early? 
4. For liquidity purposes, a client keeps $100,000 in a bank account. The bank quotes an annual interest rate of 7%.  The bank's service representative explains that this is the rate one would earn if one were to cash out rather than invest the interest payments.  How much will your client have in his account at the end of one year, assuming no additions or withdrawals, using the following types of compounding?
   1. Annually
   2. Quarterly
   3. Monthly
   4. Daily
   5. Continuous (use EXP)
5. A bank pays a stated annual interest rate of 8%.  What is the effective annual rate using the following types of compounding? Use a One-Way Data Table to compare quarterly, monthly, and daily compounding. 
   1. Quarterly
   2. Monthly
   3. Continuous
6. A bank quotes a rate of 5.89% with an effective annual rate of 6.05%.  Does the bank use annual, quarterly, or monthly compounding? Try formula 1^st, then EFFECT, then SPIN and SOLVER.