Reference no: EM132813718

Questions -

1. This problem demonstrates the dependence of the present value of an annuity on the discount rate. For an ordinary annuity consisting of 20 annual payments of $1,500, calculate the present value using an annually compounded discount rate of: (Do not round intermediate calculations and round your final answers to 2 decimal places.)

a. 5.5%

b. 10.5%

c. 11.5%

d. 15.5%

Observe that the present value decreases as you increase the discount rate. However, the present value decreases proportionately less than the increase in the discount rate.

Q2. A 15-year loan requires month-end payments of $647.33 including interest at 9.6% compounded monthly.

What is the balance on the loan after half of the payments have been made? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Q3. Suppose Evan contributes $5,000 to his RRSP at the end of every quarter for the next 20 years, and then contributes $2,500 at each month's end for the subsequent 15 years.

How much will he have in his RRSP at the end of the 35 years? Assume that the RRSP earns 8% compounded semiannually.

Q4. Charlene has made contributions of $4,400 to her RRSP at the end of every half year for the past seven years. The plan has earned 10.4% compounded semiannually. She has just moved the funds to another plan earning 8.9% compounded quarterly, and will now contribute $3,400 at the end of every three months.

What total amount will she have in the plan five years from now?