1. If you want to have $9000 in six years, how much money must you put in a savings account today, if the account pays 4% and interest is compounded annually? Answer: $7112.83

2. (a) Calculate the effective annual rate on an investment that offers a return of 4.8% per year but has monthly compounding. Round your answer to the nearest 100th of a percent. (b) Re-do the calculation with quarterly compounding. (c) Re-do again with semi-annual compounding. (d) Go back to the conditions in part a and answer this question: How much would your investment be worth five years from now if you invest $1000 today? Answers: 4.91%, 4.89%, 4.86%, $1270.64.

3. An investment in a snow-cone stand is expected to have a 6-month life. It is expected to generate a series of CFs consisting of $800 per month for the next 6 months. Using a discount rate of 2% per month in your calculation, whats the present value of this stream of expected CFs? Answer: $4481.14.

4. Your investment in a bicycle shuttle service is expected last for 5 years. The expected series of CFs is C1= $30K, C2=$20K, C3=$40K, C4=$20, and C5=$60K. Using a discount rate of 8%, calculate the PV of this stream of expected CFs from the service, rounding your answer to the nearest dollar. Answer: $132,213.

5. You want to retire in ten years and you currently have no wealth to your name. You estimate that youll will need $1.8M at your retirement date in order to live out the remainder of your life comfortably. You plan to make 10 equal annual payments into an account at the end of each year from now until your retire. If you can earn 8%/year, compounded annually, how much must you invest at the end of each year for the next 10 years? Answer: $124,253.08 per year.

6. You loan some money to a friend and he agrees to pay you $200 at the end of each month for the next 2.5 years. Using a rate of 6.3%/year, calculate what this stream of anticipated payments from your friend is worth in todays dollar terms. In other words, if your friend promises to make these payments, what would be a fair amount to loan to him today? Answer: $5537.95.

7. You want to buy a Mustang for $36K. The loan officer at the Chevrolet dealership will loan you the entire amount at an annually stated rate of 7.50%. (a) You and the lender agree on a 5-year loan, with five payments to be made, one at the end of each year for the next 5 years; thus calculate the size of your annual payment. (b) You and the lender agree on a 5-year loan, with 60 payments to be made, one at the end of each month for the next 60 months; thus calculate the size of your monthly payment. Answers: $8897.93 and $721.37.

8. Calculate the PV an annuity that pays $2000 at the end of each year for the next 33 years, given an appropriate discount rate of 8%. Answer: $23027.78.

9. Calculate the PV an annuity that pays $2000 at the end of each year from year 12 through year 44, given an appropriate discount rate of 8%. Answer: $9876.22.