Part of the income generated by an ice cream machine

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Reference no: EM131842163

1. "Part of the income generated by an ice cream machine is saved to purchase a new machine in the future. If $5,683 is deposited annually at 4% interest, how many years must the current machine last before a new machine costing $50,747 can be purchased? The first deposit will occur exactly one year from now. (Enter your answer in number of years as an integer.)"

2. "You have the alternative of receiving either $6,000 at the end of 11 years or P dollars today. You could deposit the P dollars in a bank that will pay you 5.4% interest. What value of P would make you indifferent between P dollars today and receiving $6,000 at the end of 11 years?"

3. "A judge denied a 94-year-old woman s attempt to force a Lottery Commission to pay her $4.58 million winnings up front on the grounds that she otherwise won't live long enough to collect it all. The woman already received an immediate payment of $220,285, and she will receive 16 annual gross checks of $272,483. Suppose that she were able to find a buyer who was willing to buy her lottery ticket which means that the buyer would receive 16 annual gross checks of $272,483. If the woman could invest her money from selling the lottery ticket at 11.4% interest, what would be the fair amount to trade her 16 future lottery receipts?"

4. What is the present value of the following series of payments: $84 made at the end of every year starting in year 1 and ending in year 18 EXCEPT there will be no payment of any kind at the end of year 13? The interest is 8.5% annual rate compounded annually.

5. "You make the following deposits in a bank that earns 4% interest:

08/26/2017 $1,025

01/13/2018 $4,145

06/27/2018 $570

12/18/2018 $1,668

01/19/2019 $783

07/26/2019 $1,635

You withdraw all the money at the end of 2020. How much money will you withdraw at the end of the year 2020? In your calculations, you should follow the convention that all deposits made during the year are lumped together at the end of the year. For example, any deposits made in January through December 30 can be considered as being deposited on December 31."

6. "You are paying into a mutual fund that earns 6.9% annual compounded interest. If you are making an annual contribution of $4,000, how much will be in the fund in 31 years?"

7. "You plan to start saving for your retirement by depositing $9,650 exactly one year from now. Each year you intend to increase your retirement deposit by 3%. You plan on retiring 29 years from now, and you will receive 6% interest compounded annually. How much will you have in your retirement account at the end of 29 years if you follow this strategy (i.e., make your 29 annual deposits)? This type of cash flow is called a geometric gradient. The formula to calculate the present worth of a geometric gradient is found in Table 3.6 in the textbook."

Reference no: EM131842163

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