1.

Richard Lionheart decides to begin saving toward the purchase of a car in 4 years. He originally thought he would put $1200 in a savings account paying 7 percent compounded annually at the end of each of the next 4 years.

However, rather than save once per year, he decides to save twice per year. What would be the ending amount if $600 payments were made every 6-months for 4 years and the account paid 7 percent compounded semiannually?

2.

Margery Kempe is considering investing in an annuity. What is the present value of an annuity due consisting of $350 payments for 7 years if interest rates are 5.5 percent per year?

3.

What is the present value (t=0) of the following cash flows if the discount rate is 12 percent?

Year Cash flow 0 (80) 1 25 2 35

3 20 4 51