Reference no: EM133116393

Questions -

Q1. Amjencio is ready to hire you for a first year salary of $56,000 (assume an inflow of this at the end of year 1) with a guaranteed increase of 2.5% every year for a 35-year contract. How much is the total contract worth at the end of the 35-year term at a 7% interest rate, compounded yearly?

Over $1.4 million

Over $9.5 million

Over $6.7 million

Over $10.3 million

Q2. A machine costs $270,000 and has a life of 12 years. The machine will be under total warranty for 3 years. In the 4th year the maintenance cost is estimated to be $3,500, and increases by $1,750 each year till the 12th year. What amount will the company have to put aside at 6% interest per annum compounded yearly for the maintenance?

Around $56,100

Around $65,300

Around $36,200

Around $45,800

Q3. Mary would like to save for retirement. She starts a money market account on her 28th birthday with $2,000 with an investment company which is guaranteed to earn at least 2% per year, compounded six-monthly. She would like to retire on her 67th birthday by being able to make 2 deposits per year. She starts the first deposit of $1,000 six months after her 28th birthday, followed by another $1,000 deposit six months later on her 29th birthday. She increases the deposit the next year by $100, and repeats the deposit pattern which ends on her 67th birthday . How much can she expect to have collected in her account on her 67th birthday?

$423,540

$315,250

$546,630

$259,350