# Homework_1 - FIN340 HOMEWORK#1 1 After retirement you...

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1 FIN340 HOMEWORK #1 1. After retirement, you expect to live for 25 years. You would like to have \$75,000 income each year. How much should you have saved in the retirement to receive this income, if the interest is 9% per year (if payments start one year after the retirement)? a. \$736,693.47 b. \$6,352,567.22 c. \$1,875,000 d. None of the above 2. Joe Home has taken a \$250,000 mortgage on his house at an interest rate of 6% per year. If the mortgage calls for twenty equal annual payments, what is the amount of each payment? a. \$21,796.14 b. \$10,500.00 c. \$16,882.43 d. None of the above 3. If the present value of \$1.00 received n years from today at an interest rate of r is 0.3855, then what is the future value of \$1.00 invested today at an interest rate of r % for n years? a. \$1.3855 b. \$2.594 c. \$1.70 d. Not enough information to solve the problem 4. Mark Etting got into finance and decided to invest \$1000 at 10% nominal rate for one year. If the inflation rate is 4%, what is the real dollar value of the investment at the end of one year? a. \$1100 b. \$1000 c. \$1058 d. None of the above 5. A senior analyst at 7-Eleven figures that an amount of \$711,711 will be needed in seven years from now to replace a piece of equipment at the corporate headquarters in Dallas. How much must be invested each year at 7.11% p.a. in order to provide for this replacement? The first installment is made one year from now, and the final installment is made seven years from now (i.e. at the time the machine must be purchased).

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2 6. What is the present value of the following cash flows streams of one million dollars?
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Homework_1 - FIN340 HOMEWORK#1 1 After retirement you...

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