What should you be willing to pay today for this annuity

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Reference no: EM132061454

1. Your Aunt Brooke has promised to leave you an annuity that will make its first payment of $70 in exactly one year. Thereafter, the payments will grow at an annual rate of 3.00%. The payments are expected to go on indefinitely. Your relevant interest rate is 9%. What is the value of the growing perpetuity?

2. An insurance company offers you an end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9 percent. What should you be willing to pay today for this annuity?

3. Professor Severus Snape deposited 500 Galleons into an account at Gringotts Bank, that pays 4% nominal annual interest, compounded quarterly. How much will he have in his account 10 years from now?

4. You borrow $149,000 to buy a house. The mortgage rate is 4.0% and the loan period is 15 years. Payments are made monthly. If you pay for the house according to the loan agreement, how much total interest will you pay?

Reference no: EM132061454

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