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1) A) What is the future value of $300 received today if it earns compound interest at 9% per year for three years? B) Suppose

1)

A) What is the future value of $300 received today if it earns compound interest at 9% per year for three years?

B) Suppose the above investment gave you interest payments every 6 months. What is the future value of your investment after three years?

2)

a) You borrow 100 now and are required to pay back 180 in two years time. What rate of interest are you being charged?

3)

You want to treat yourself to a new sports car. The car dealership gives you two choices. You can pay $70,000 cash now, or pay it in three instalments: $40,000 now and $20,000 at the end of each of the next two years. If your cost of money is 9%, which do you prefer? Explain and show your answer.

4)

A small-scale entrepreneur deposits money into her savings account at the beginning of each year, depending on the returns of the business. She deposits $1500 in the first year, $3000 in the second year, $5000 in the third, and $7000 in the fourth year. The account credits interest at an annual interest rate of 8.5%. A) Show a timeline of the cash-flows. B) What is the value of the accumulated money in the savings account at the beginning of year 4?

5)

You have just retired and your pensioner agrees to pay you 14,000 per year for the next 5 years as an annuity, and you receive the first payment today. Assuming that the interest rate is 7.5%, calculate the closest value of the present value of your payments.

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