Extra Problems 3

# Extra Problems 3 - can buy a \$3600 stereo by making 12...

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ACTSC 231 Extra Problem Set 3 1. If a u 1 u t U u 1 u .03 t , find the present value of a 2-year annuity-immediate which pays \$250 semiannually. Also find the accumulated value of this annuity one year after the last payment. 2. The present value of an annuity-immediate which pays \$200 every 6 months during the next 10 years and \$100 every 6 months during the following 10 years is \$4000. The present value of a 10-year deferred annuity-immediate which pays \$250 every 6 months for 10 years is \$2500. Find the present value of an annuity-immediate which pays \$150 every 6 months during the next 10 years and \$300 every 6 months during the following 10 years. 3. To buy a car costing \$13,600 you can pay \$1600 down and the balance in 36 monthly payments of \$450 each. You can also borrow the money from a loan company and repay \$13,600 by making quarterly payments of \$1,060 over 5 years, first payment in 3 months. Which option has the lower interest rate? 4. The “Good Deal” Co. advertises “ZERO Percent interest for 1-year” policy. For example, you
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Unformatted text preview: can buy a \$3600 stereo by making 12 monthly payments of \$300 (i.e. 3600 12 u 300) with the first payment starts in exactly one month from the time of the purchase. However, if you decide to pay in full at the time of the purchase, you get a 20% cash discount. What rate of interest i u 12 U is the “Good Deal” Co. actually charging ? 5. \$ X is deposited at the end of each quarter for 4 years to fund a perpetuity paying \$2000 per quarter. The first perpetuity payment is made 1 year after the last deposit. Find \$ X if i u 4 U u 10% in the first 4 years and i u 4 U u 8% thereafter. 6. Calculate, assuming an annual effective rate of 5.5%: a. The present value of an annuity of 100 p.a. payable at the beginning of each quarter for 25 years. b. The accumulated value of an annuity of 1000 per year, payable at the beginning of each month for 10 years. c. The present value of an annuity of 200 per year payable continuously for 3 years....
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## This note was uploaded on 02/07/2010 for the course ACTSC 231 taught by Professor Chisholm during the Spring '09 term at Waterloo.

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