1. Assume you retire today with $500,000 in your account. You plan to withdraw $4,000 at the end of each month as retirement income from this account. If the interest rate is 4.5% compounded monthly, how many months can you be retired until you have no money left? How many years?

You opened a savings account with your first deposit of $1,200 at the end of the first year. At the end of Year 2, you plan to deposit $500. You plan to deposit $2,000 at the end of Year 3, 4 and 5. The interest rate is a 4 percent nominal rate compounded semiannually. If you do as you plan, how much will you have in your account at the end of Year 7?

3. Given you receive the following cash flows at the beginning of the year indicated below, what is the future value if the interest rate is 6.75% compounded annually?

Beginning of Year	Cash Flow
1	$8,000
2	$12,500
3	$25,000
4	$10,000
5	$10,000
6	$10,000

4. You can afford car payments of $250 a month for six years. The payments are made at the beginning of each month. The interest rate is 7.2% nominal rate compounded monthly. How much can you afford to borrow today to buy a car?

5. What is the present value of an investment with 10% annual compounding and a payment of $250 at the end of each year forever?

6. You have 10,000 in the bank today. You deposit equal payments of $2000 in the bank for the next 3 years only. Assume the payments are made at the end of the year and earn 5% nominal rate compounded annually.

How much money will you have at the end of 3 years?______________

How much will you have at the end of 6 years given the same rate and compounding period?

You find a new investment at the end of year 6 that earns 4.7% compounded monthly. If you want to earn the most on your money, should you move your money to the new investment or keep it where it is for four more years? Assume there are no fees or penalties for moving your money. Show our work and explain your answer.

7. You deposit equal payments of $850 in the bank for the next ten years. Assume the payments are made at the beginning of each year. Given you will have $15,400 at the end of ten years with monthly compounding.

What is the effective rate of this investment?

What is the nominal rate of this investment?

What is the periodic rate of this investment?

8. You are looking for a business loan. Which Bank would you choose? Show your work and explain your answer.

Red Bank	Blue Bank
10.25%	10.8
Quarterly compounding	Annual Compounding

Use the Table below to complete an amortization schedule for a 3 year loan of $4,000 with a 10% nominal rate compounded annually. Assume payments are made at the end of the year.

YEAR	Beginning Balance	Payment	Interest Paid	Principal Paid	Ending Balance
1
2
3

10. Assume a 6% interest rate compounded quarterly. What is the Present Value of an investment that promises to pay the following: $1200 received at the end of each year for 30 years?___________________