Reference no: EM133239808
1. You are expecting a project to produce the following cash flows for years 1 through 4 respectively: $1,545, $1,525, $1,443, $1,369. If you want to earn a rate of return of 15 percent on your investment, how much would you be willing to pay for it today?
2. Todd is able to pay $183 a month for 7 years for a car. If the interest rate is 9 percent APR, how much can Todd afford to borrow to buy a car?
3. If you invest $878 at the end of each year for the next 6 years, and earn 9 percent rate of return, how much money will you have at the end, right at the time you make the last investment?
4. You borrow $6,136 to buy a car. The terms of the loan call for monthly payments for 5 years, and the lender wants to earn 8 percent APR on its money. What must be the amount of each payment?
5. The Good Life Insurance Co. wants to sell you an annuity which will pay you $508 per quarter for 22 years. You want to earn a minimum rate of return of 9.99 percent APR. What is the most you are willing to pay as a lump sum today to buy this annuity?
6. You are expecting to receive $339 at the end of each year in years 3, 4, and 5, and then $529 each year at the end of each year in years 10 through 25, inclusive. If the appropriate discount rate is 9.53 percent, for how much would you be able to sell your claim to these cash flows today?
7. You expect to receive $1,048 every year at the end of each year, starting at the end of year 5 and ending at the end of year 15. If you expect the rate of return is 9.2 percent, and you invest all your cash flows at the going rate as soon as you receive them, how much money will you have at the end of year 25?
8. If the rate of inflation is expected to be 4.53% per year, what will be the value of $146 thousand dollars in 30 years, as measured in today's dollars?
9. Measured in today's dollars, how much better is it to receive $2,559 in 4 years than to receive $5,858 in 15 years, if the rate of return is 9.3% per year?
10. You have the option of spending $1000 today, in exchange for receiving $415 at the end of each of the next four years. Assume you can generally earn a rate of return of 6.4% per year.
How much more wealth will you have at the end of 10 years if you take the option, relative to just investing your $1000 elsewhere?
11. An insurance company is offering a perpetual annuity (perpetuity) of $1,075 per year at the end of each year, in exchange for an $20,168 up front payment today.
What is the implied rate of return on this investment?