Question

# 1- (Loan amortization) On December 31, Beth Klemkosky bought a yacht for $90 comma 000. She

paid $12 comma 000 down and agreed to pay the balance in 7 equal annual installments that include both the principal and 13 percent interest on the declining balance. How big will the annual payments be?

2- (Present value of annuity payments) The state lottery's million-dollar payout provides for $1.1 million to be paid in 20 installments of $55 comma 000 per payment. The first $55 comma 000 payment is made immediately, and the 19 remaining $55 comma 000 payments occur at the end of each of the next 19 years. If 9 percent is the discount rate, what is the present value of this stream of cash flows? If 18 percent is the discount rate, what is the present value of the cash flows?

3- (Annuity payments) Lisa Simpson wants to have $2 comma 000 comma 000 in 60 years by making equal annual end-of-the-year deposits into a tax-deferred account paying 9.25 percent annually. What must Lisa's annual deposit be?

4- (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $3 comma 500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 14%? What if the appropriate discount rate is 12%?