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# Fina A - 1 Question...

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1. Question : You want to buy a new sports car 3 years from now, and you plan to save \$4,200 per year, beginning one  year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you  have just after you make the 3rd deposit, 3 years from now? Student Answer: a.       \$11,973.07 b.       \$12,603.23 c.       \$13,266.56 ( N        3 I/YR    5.2% PV      \$0.00 PMT    \$4,200 FV      \$13,266.56 ) d.       \$13,929.88 e.       \$14,626.38 2. Question : Suppose you inherited \$275,000 and invested it at 8.25% per year. How much could you withdraw at the  beginning of each of the next 20 years? Student Answer: ( N        20 I/YR    8.25% PV      \$275,000 FV      \$0.00 PMT    \$26,357.92 )

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3. Question : What's the rate of return you would earn if you paid \$950 for a perpetuity that pays \$85 per year? Student Answer: ( Cost (PV)      \$950 PMT    \$85 I/YR    8.95% ) 4. Question : What is the present value of the following cash flow stream if the interest rate is 6.0% per year? 0 at Time  0; \$1,000 at the end of Year 1; and \$2,000 at the end of Years 2, 3, and 4. Student Answer: CFs:    \$0      \$ \$2,000 PV of CFs:     \$ \$1,679 \$1,584
PV =   \$5,986. the Excel NPV PV =   \$5,986. summing indiv PV =   \$5,986. the calculator N )

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