Ch. 6 7 8 9 question.docx - Ch. 6 1. Investment X offers to...

Ch. 6
1. Investment X offers to pay you $4,200 per year for eight years, whereas Investment Y offers to pay you
$6,100 per year for five years.
2. An investment offers $4,350 per year for 15 years, with the first payment occurring one year from now.
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3. If you put up $41,000 today in exchange for a 5.1 percent, 15-year annuity, what will the annual cash flow
be?
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4. You plan to deposit $4,500 at the end of each of the next 20 years into an account paying 9.7 percent interest.
5.
You want to have $60,000 in your savings account 12 years from now, and you’re prepared to make equal
annual deposits into the account at the end of each year. If the account pays 6.4 percent interest, what
amount must you deposit each year?
6. Prescott Bank offers you a five-year loan for $75,000 at an annual interest rate of 6.8 percent. What will
your annual loan payment be?
7. Find the EAR in each of the following cases Explanation: 10% quarterly: EAR=(1+APR/4)^4-1;
8.
First National Bank charges 13.1 percent compounded monthly on its business loans. First United Bank
charges 13.4 percent compounded semiannually. Calculate the EAR for First National Bank and First
9. What is the future value of $3,100 in 17 years assuming an interest rate of 8.4 percent
1. PV
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2.
;
3. The present value of the following cash flow stream is $7,500 when discounted at 9 percent
annually. What is the value of the missing cash flow?

PV of missing cash flow = $7,500 – 1,559.63 – 1,891.85 – 2,111.11;
PV of missing cash flow = $1,937.41;
Missing cash flow = $1,937.41(1.09) 2 ; Missing cash flow = $2,301.84
4. The appropriate discount rate for the following cash flows is 9 percent compounded quarterly.