1. You are the lucky winner of your states lottery of $5 million after taxes. You invest your winnings in a five-year certificate of deposit (CD) at a local financial institution. The CD promises to pay 7 percent per year compounded annually. This institution also lets you reinvest the interest at that rate for the duration of the CD.How much will you have at the end of five years if your money remains invested at 7 percent for five years with no withdrawals?

2. An institution offers you the following terms for a contract: For an investment of$2,500,000, the institution promises to pay you a lump sum six years from now at a 8 percent annual interest rate. What future amount can you expect?

3. A pension fund manager estimates that his corporate sponsor will make a $10 million contribution five years from now. The rate of return on plan assets has been estimated at 9 percent per year. The pension fund manager wants to calculate the future value of this contribution 15 years from now, which is the date at which the funds will be distributed to retirees. What is the future value?

4. An Australian bank offers to pay you 6 percent compounded monthly. You decide to invest A$ 1 million for one year. What is the future value of your investment if interest payments are reinvested at 6 percent?

5. Suppose your companys defined contribution retirement plan allows you to invest up to $20,000 per year. You plan to invest $20,000 per year in a stock index fund for the next 30 years. Historically, this fund has earned 9 percent per year on average. Assuming that you actually earn 9 percent a year, how much money will you have available for retirement after making the last payment?

6. An insurance company has issued a Guaranteed Investment Contract (GIC) that promises to pay $100,000 in six years with an 8 percent return rate. What amount of money must the insurer invest today at 8 percent for six years to make the promised payment?7. Suppose you are considering purchasing a financial asset that promises to pay $1,000 per year for five years, with the first payment one year from now. The required rate of return is 12 percent per year. How much should you pay for this asset?