1) A philatelist, learning of a special run of stamps by the US Postal Service, decided that if he

found a certain right-side up stamp, he could sell it in 3 years for $55,000. If his cost of

capital is 11%, and a stamp costs $0.50, how many stamps can he buy and not lose money

on the investment (assuming he finds the important right side up stamp)?

2) You are purchasing an annuity that will pay you 15,000 a year for 5 years, beginning in year

20. The rate of return on the annuity is 3.5%. What are you going to pay for the annuity

today?