1.How long will it take to double your money with an interest rate of 10 percent? 20 percent? 40 percent? What about tenfold increase in your money with a growth rate of 50 percent?

1. On the advice of your broker ten years ago, you invested in a $6 stock that is now selling for $30. At what rate has your capital grown?
2. Your father is about to retire. His firm has given him the option of retiring with a lump sum of $50,000 or an annuity of $8,000 for ten years. Which is worth more now, if the discount rate is (1) 6%, (2) 18%?
3. You are offered a $15,000 life insurance policy requiring thirty annual payments of $195 each. What is the compound value of the payments that you will have made after the policy is paid up, assuming that the discount rate is 10 percent?

Mr. Smith retires in exactly 20 years. At that time he desires to have accumulated enough money so that he can consume $100,000 per year for perpetuity starting at that time. He, furthermore, wishes to make equal payments to his account each period -- 20 payments in all. What should his yearly savings be to achieve these objectives, if the after tax return available to him is 15%?Mr. D. plans to retire exactly twenty years from now (), and he would like to have accumulated, by retirement, enough money to enjoy a $100,000 per year retirement income beginning in year 21 and continuing in perpetuity thereafter. So far he has saved up $50,000, all in stocks (that is, at his pension account contains $50,000).

What must his annual contributions be if he is to achieve his goal (assume he makes 20 payments)? On average he expects to earn 10% on his money.

The stock market collapses. By the end of the day (it is still )his accumulated wealth has fallen to $30,000. Assuming he still expects on average to earn 10%, how much must he now contribute (assume 20 equal payments)?

You have been asked by your boss to evaluate three mutually exclusive projects. The cash flow estimates and costs of each project are given below:

	T=0	1	2	3	4	5	6	7
Project A	-3790	200	600	300	1000	2800
Project B	-3790	1000	1000	1000	1000	1000
Project C	-3790	0	0	0	0	0	0	5400

(all numbers are in thousands of dollars)

As precisely as you can, describe how the most preferred project is related to the cost of capital.

5. (a) What rate, when continuously compounded, will yield a 14% annual rate?

(b) What is the effective annual rate when the 14% rate is continuously compounded?

(c) Consider a cash flow of $10 every period in perpetuity starting one period from now (period ). What would be its price under continuous compounding of a 10% annual rate?