Reference no: EM132819943
1.) Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $172,000, received two years from today. Subsequent annual cash flows will grow at 3.2 percent in perpetuity.
What is the present value of the technology if the discount rate is 9 percent?
2.) What is the value today of a 15-year annuity that pays $610 per year? The annuity's first payment occurs six years from today. The discount interest rate is 10 percent for Years 1 through 5 and 12 percent thereafter.
3.) You need a 30-year, fixed-rate mortgage to buy a new home for $265,000. Your mortgage bank will lend you the money at an APR of 5.6 percent for this 360-month loan. However, you can only afford monthly payments of $1,050, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $1,050?
4.) A local finance company quotes an interest rate of 18 percent on one-year loans. So, if you borrow $22,000, the interest for the year will be $3,960. Because you must repay a total of $25,960 in one year, the finance company requires you to pay $25,960/12, or $2,163.33, per month over the next 12 months.
What rate would legally have to be quoted?
What is the effective annual rate?