More_TVM_probs1 - Finance 254 Additional Time Value of Money Problems Annuities Due Perpetuities and Non-even Cash Flow Streams 1 In ten years you

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1. In ten years, you would like to have $10,000 saved as a down payment on a new home. To accumulate this amount, you will make ten equal deposits, beginning today, into a savings account that pays an annual interest rate of 4%. How much must you deposit each year to reach your goal? 2. You are willing to pay $20,000 to purchase a perpetuity that will pay you $100 each month forever. What APR will you earn if you make this purchase? 3. Determine the present value of an ordinary annuity of $1,000 per year for 10 years with the first cash flow from the annuity coming at the end of year 8 (that is, no payments at the end of years 1 through 7 and annual payments at the end of years 8 through 17) given a 15% discount rate. 4. You think it would be really neat to walk out on the court at half time of an Illinois home basketball game to present the Athletic Association with a check to endow a basketball scholarship. Your plan is to do this 30 years from today. By then, the Athletic Association estimates they will need an amount equal to the present value at 5% of a
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This note was uploaded on 09/19/2009 for the course FIN FIN 221 taught by Professor Fin221 during the Fall '09 term at University of Illinois, Urbana Champaign.

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