Assume you are planning to invest $200 each year for four years and will earn 8 percent per year. Determine the future value of this annuity due...
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1.     Assume you are planning to invest $200 each year for four years and will earn 8 percent per year.

Determine the future value of this annuity due problem if your first $200 is invested now.


2.Assume a $1,000 face value bond has a coupon rate of 9.5% paid semiannually and has an eight-year life. If investors are willing to accept a 12 percent rate of return on bonds of similar quality, what is the present value or worth of this bond?



3.Using the PVIFA table (table 9.4 in the textbook), determine the annual payment on a $600,000, 10 percent, business loan from a commercial bank that is to be amortized over a five-year period.


4. You are considering borrowing $200,000 to purchase a new home.

a.      Calculate the monthly payment needed to amortize a 7% fixed-rate 30-year mortgage loan.

b.     Calculate the monthly amortization payment if the loan in (a.) was for 15 years.



5.Use a financial calculator or computer software program to answer the following questions:

a.      What is the present value of $450,000 that is to be received at the end of 20 years if the discount rate is 10%?

b.     How would your answer change in (a.) if the $450,000 is to be received at the end of 15 years?

Top Answer

1. $901.22 2. $873.64 3.... View the full answer

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