1- Larry Davis borrows $73,000 at 12 percent interest toward the purchase of a home. His mortgage is for 30 years. UseAppendix Dfor an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a.How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.)

b.How much interest will he pay over the life of the loan?

c.How much should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage? Assume current interest rates are 10 percent. Carefully consider the time value of money. Disregard taxes.

2- If you invest $9,300 per period for the following number of periods, how much would you have in each of the following instances? UseAppendix Cfor an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a.In 11 years at 8 percent?

b.In 40 years at 7 percent?

3- Al Rosen invests $23,000 in a mint condition 1952 Mickey Mantle Topps baseball card. He expects the card to increase in value 11 percent per year for the next 12 years.

How much will his card be worth after 12 years? UseAppendix Afor an approximate answer, but calculate your final answer using the formula and financial calculator methods.

4- Carrie Tune will receive $32,500 for the next 15 years as a payment for a new song she has written. UseAppendix Dfor an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a.What is the present value of these payments if the discount rate is 17 percent?

5-Maxwell Communications paid a dividend of $0.80 last year. Over the next 12 months, the dividend is expected to grow at 10 percent, which is the constant growth rate for the firm (g). The new dividend after 12 months will representD₁. The required rate of return (K_e) is 17 percent.

Compute the price of the stock (P₀)

6- Les Moore retired as president of Goodman Snack Foods Company but is currently on a consulting contract for $58,000 per year for the next 11 years. UseAppendix BandAppendix Dfor an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a.If Mr. Moore's opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract?

b.Assuming Mr. Moore will not retire for two more years and will not start to receive his 11 payments until the end of the third year, what would be the value of his deferred annuity?

7- You will receive $6,500 three years from now. The discount rate is 8 percent.

a.What is the value of your investment two years from now? Multiply $6,500 (1/1.08) or divide by 1.08 (one year's discount rate at 8 percent).

b.What is the value of your investment one year from now? Multiply your answer to part a by (1/1.08).

c.What is the value of your investment today? Multiply your answer to part b by (1/1.08)

d.Use the formulaPV = FV (1/(1+i)ⁿ)to find the present value of $6,300 received three years from now at 8 percent interest.

8- If you invest $18,500 today, how much will you have in each of the following instances? UseAppendix Aas an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a.In 9 years at 10 percent?

b.In 17 years at 10 percent?

c.In 18 years at 10 percent?

d.In 20 years at 10 percent (compounded semiannually)?

9- North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $9 per share. With the passage of time, yields have changed from the original 11 percent to 8 percent (yield is the same as required rate of return).

a.What was the original issue price?

b.What is the current value of this preferred stock?

10- Beverly Hills started a paper route on January 1. Every three months, she deposits $850 in her bank account, which earns 8 percent annually but is compounded quarterly. Four years later, she used the entire balance in her bank account to invest in an investment at 7 percent annually.

How much will she have after three more years? UseAppendix AandAppendix Cfor an approximate answer, but calculate your final answer using the formula and financial calculator methods.

\fAppendix D Present value of an annuity of $1, PV IFA PVA = A (1 + i) Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 11% 12% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.759 1.736 1.713 1.690 3 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.444 2.402 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3. 102 3.037 5 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.890 3.791 3.696 3.605 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.355 4.231 4.111 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 4.868 4.712 4.564 8 7.652 7.325 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 9 8.566 8. 162 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.328 10 9.471 8.983 8.111 7.722 7.360 7.024 6.710 6.418 6. 145 5.650 11 10.368 9.787 9.253 8.306 7.887 7.499 7.139 6.805 6.495 5.938 12 11.255 10.575 9.954 9.385 8.384 7.943 7.536 7.161 6.814 6.492 6. 194 13 12. 134 11.348 9.986 9.394 8.358 7.904 7.103 6.424 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 15 13.865 12.849 11.938 11.1 18 10.380 9.712 8.559 8.061 7.606 7.191 6.811 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 17 15.562 14.292 13.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 18 16.398 14.992 13.754 12.659 1 1.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 19 17.226 15.678 14.324 13. 134 12.085 11. 158 10.336 9.604 8.950 8.365 7.839 7.366 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 25 22.023 19.523 17.413 15.622 12.783 11.654 10.675 9.823 9.077 8.422 7.843 30 25.808 22.396 19.600 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 40 32.835 27.355 23.115 19.793 17. 159 15.046 11.925 9.779 8.951 8.244 50 39. 196 31.424 25.730 21.482 18.256 15.762 13.801 12.233 10.962 9.915 9.042 8.304\fAppendix C Future value of an annuity of $1, FV IFA FVA = A (1+ 1)" -1 Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 11% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2 2.010 2.020 2.030 2.040 2.050 2.060 2.070 2.080 2.090 2. 100 2.1 10 3 3.030 3.060 3.091 3.122 3.153 3. 184 3.215 3.246 3.278 3.310 3.342 4 4.060 4. 122 4. 184 4.246 4.310 4.375 4.440 4.506 4.573 4.641 4.710 5. 101 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.105 6.228 6 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7.336 7.523 7.716 7.913 7.214 7.434 7.662 7.898 8. 142 8.394 8.654 8.923 9.200 9.487 9.783 8 8.286 8.583 8.892 9.214 9.549 9.897 10.260 10.637 11.028 11.436 11.859 9 9.369 9.755 10.159 10.583 11.027 11.491 11.978 12.488 13.021 13.579 14. 164 10 10.462 10.950 11.464 12.006 12.578 13. 181 13.816 14.487 15.193 15.937 16.722 11 ....... 1 1.567 12. 169 12.808 13.486 14.207 14.972 15.784 16.645 17.560 18.531 19.561 12 12.683 13.412 14. 192 15.026 15.917 16.870 17.888 18.977 20.141 21.384 22.713 13 13.809 14.680 15.618 16.627 17.713 18.882 20.141 21.495 22.953 24.523 26.212 14.947 15.974 17.086 18.292 19.599 21.015 22.550 24.215 26.019 27.975 30.095 15 16.097 17.293 18.599 20.024 21.579 23.276 25. 129 27.152 29.361 31.772 34.405 16 17.258 18.639 20.157 21.825 23.657 25.673 27.888 30.324 33.003 35.950 39. 190 17 ...... 18.430 20.012 21.762 23.698 25.840 28.213 30.840 33.750 36.974 40.545 44.501 18 19.615 21.412 23.414 25.645 28.132 30.906 33.999 37.450 41.301 45.599 50.396 19 20.811 22.841 25.1 17 27.671 30.539 33.760 37.379 41.446 46.018 51.159 56.939 20 22.019 24.297 26.870 29.778 33.066 36.786 40.995 45.762 51.160 57.275 64.203 25 28.243 32.030 36.459 41.646 47.727 54.865 63.249 73.106 84.701 98.347 114.41 30 34.785 40.588 47.575 56.085 66.439 79.058 94.461 1 13.28 136.31 164.49 199.02 40 48.886 60.402 75.401 95.026 120.80 154.76 199.64 259.06 337.89 442.59 581.83 64.463 84.579 1 12.80 152.67 209.35 290.34 406.53 573.77 815.08 1, 163.9 1,668.8