How much money must you set aside today

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Q1. You have won a contest that will pay you $10,000 a year at the end of each of the next 5 years. Based on a discount rate of 8% per year, what is the annuity worth to you today?

Q2. You would like to contribute $70,000 towards your grandchild's college education 16 years from now. How much money must you set aside today for this purpose if you believe you can earn 7.5% per year on your investment?

Q3. You are considering purchasing a 15-year 9% unsecured bond at a price of $960:

1. How much is the bond's face value?

2. How much is the bond's coupon?

3. What is the bond's current yield?

Reference no: EM133094139

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