1.

You are contributing money to an investment account so that you can purchase a house
in five years. You plan to contribute six payments of $3,000 a year. The first payment will
be made today (t = 0) and the final payment will be made five years from now (t = 5). If
you earn
11 percent in your investment account, how much money will you have in the account
five years from now (at t = 5)?

2. Today is your 21st birthday, and you are opening up an investment account. Your plan is
to contribute $2,000 per year on your birthday and the first contribution will be made
today. Your 45th, and final, contribution will be made on your 65th birthday. If you earn
10 percent a year on your investments, how much money will you have in the account on
your 65th birthday, immediately after making your final contribution?

3. Your bank account pays a nominal interest rate of 6 percent, but interest is compounded
daily (on a 365-day basis). Your plan is to deposit $500 in the account today. You also plan
to deposit $1,000 in the account at the end of each of the next three years. How much
will you have in the account at the end of three years, after making your final deposit?

4. 2. Rachel wants to take a trip to England in 3 years, and she has started a savings account
today to pay for the trip. Today (8/1/02) she made an initial deposit of $1,000. Her plan
is to add $2,000 to the account one year from now (8/1/03) and another $3,000 to the
account two years from now (8/1/04). The account has a nominal interest rate of 7
percent, but the interest is compounded quarterly. How much will Rachel have in the
account three years from today (8/1/05)?

5. 3. Bill plans to deposit $200 into a bank account at the end of every month. The bank
account has a nominal interest rate of 8 percent and interest is compounded monthly.
How much will Bill have in the account at the end of 2½ years (30 months)?

6. 4. You have been offered an investment that pays $500 at the end of every 6 months for
the next 3 years. The nominal interest rate is 12 percent; however, interest is
compounded quarterly. What is the present value of the investment?

7. 5. You have been offered an investment that pays $500 at the end of every quarter for
the next 3 years. The nominal interest rate is 12 percent; however, interest is
compounded monthly. What is the present value of the investment?