What is the embedded interest rate offered by the bank

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1) Suppose you have an option to invest $15,000 for the next 25 years in an account that earns 5% per annum or investment 15,000 in a scheme that returns 3x your investment after 25 years. Which option would you choose?

2) A bank offers an investment opportunity, which requires you to invest 10,000 today and the bank promises to return 15,000 in 10 years. What is the embedded interest rate offered by the bank?

3) You require $500,000 at the end of your retirement, which is 25 years from now. Assume you have no cash balance in the account which offers an interest rate of 4%. How much should save every month?

4) You lease a land to a bank that promises to pay you 72,000 per year and increase the rent by a fixed rate of 1.5% every year for next 5 years. What is the value of rental income that you expect to generate? Appropriate discount rate is 3%.

5) Your father is about to retire, and he wants to buy an annuity that will provide him with $85,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the annuity today?

Reference no: EM13873631

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