1. Annuity Factors [ [ LO1] There are four pieces to an annuity present value. What are they? 3. Interest Rates [ LO1] What happens to the future value of an annuity if you increase the rate r ? What happens to the present value? 4. Present Value [ LO1] What do you think about the state lottery discussed in the chapter advertising a $500,000 prize when the lump sum option is $250,000 ? Is it deceptive advertising? 7. APR and EAR [ LO4] Should lending laws be changed to require lenders to report EARs instead of APRs? Why or why not? 1. Perpetuity Values [[] LO1] What happens to the future value of a perpetuity if interest rates increase? What if interest rates decrease? EAR versus APR [G] LO4] Big Dom's Pawn Shop charges an interest rate of 25.5 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. What rate should the shop report? What is the effective annual rate? Calculating Annuity Payments [[[[C LO1] You want to be a millionaire when you retire in 40 years. How much do you have to save each month if you can earn an APR of 10.2 percent? How much do you have to save each month if you wait 10 years before you begin your deposits? 20 years? Calculating Growing Annuities [] LO1] You have 40 years left until retirement and want to retire with $4.5 million. Your salary is paid annually, and you will receive $60,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn an annual return of 9 percent on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year