are Student ID. Show work gel ays 1. You are considering two savings options. Both options offer a 6 percent rate of return. The first option is to save $1,200, $1,500, and $2,000 a year over the next three years, respectively. The other option is to save one lump sum amount today. If you want to have the same balance in your savings at the end of the three years, regardless of the savings method you select, how much do you need to save today if you select the lump sum option? 5 Fiaoodi.o6)! = 1132.08 jzoe Neo Pe 4 |coo cioe) "> : 1334.94 5 Aldo .3 | ob)? = vt Lge f 2000C1.06) AS F424 2. What is the future value of the following cash flows (end of year) at the end of year 3 if the interest rate pg 10 percent? L 2 Year! Year? —Year3 $4400C1.10)— = $4900 $5400 $6,000 = Cea SA4i 4400 $420 (p00 ¥5 2008) 2 cao. |! f _+—_+—_ oo ot 2 3 [erage] Sees 3. You have a sub-contracting job with a local perce firm. Your agreement calls for annual payments of $82,000 for the next 3 years. Ata discount rate of 12 percent, what is this jot Zoln Int 2 tebe ps gether A nterést Quiz aes 2 WA, on & 42000) = \B1%6,1S0. 164, Which of the following is (are) correct conceming perpetuities? erpetuities consist ofa stream of equal payments, VaPerpetuities have a life of between twenty and one hundred years. rhe PV of perpetuities increase in value as interest rates decrease. ' [V7The present value perpetuity formula for a stream of annual payments is: Cit. x0, VW N viol | s i 5. What is the effective annual rate of 10% compounded quarterly? LZ tor vy i lofi 42 252 2 = (02s yt = 6. The Frank Trust would like to gift some money to their local university so that the money gifted will provide $100,000 to the university each year from now on. The funds are expected to earn an 6% rate of return. How ‘much money does the Frank Trust have to gift to the university today? [e000 | $1,666,667 — oe. 047. ° 7. Mrs. Black established a trust fund that provides $65,000 in scholarships each year for needy students. The trust fund earns a fixed 5¢percent rate of return, How much money did Mrs. Black contribute to the fund Cg 00D - 92 OFT. 429 54