Find what is the present value of the annuity

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Reference no: EM131981063

Question: 1. You have $50,000 to start an education fund for your child. You are expecting him/her to attend college 18 years from now. According to statistics, the expected amount you will need 18 years later should be $300,000. What is the required rate of return of your fund in order to meet your need 18 years from now? (Write your answer in decimal format, for example, write 0.0500 for 5.00%)

2. You received a promotional mail from your banking advertising a new credit card with a stated rate of 15.99% per year. What is the effective annual interest rate of this credit card that compounds monthly?

3. An 20-year annuity pays $500 a year at year end. If the annuity's first cash flow starts at the end of year 1 and the annual interest rate is 4%, what is the present value of this annuity?

4. You just won a lottery of $1,000,000. The lottery payment is made in the form of an annuity due with the first payment made today. The lottery pays$10,000 every month for 100 months (8 years and 4 months). If the proper discount rate is 4% per year, what is the actual present value of your winning?

5. You are purchasing a new house at $500,000 in Cincinnati.You're making the purchase with an initial deposit of $200,000 and the rest with a 30-year fixed rate mortgage with an interest rate of 3.5% per year with payments made monthly. Excluding all fees, what is your monthly mortgage payment?

6. Every month, your employer deposits $1200 into your 401-K account, with the first payment made 1 month from now. The stated annual rate of return on 401-K account is 12%. How much will you have in your 401-K account after working for 5 years, assuming no additional contribution was made?

Reference no: EM131981063

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