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1. You find from your account statement that the nominal interest rate associated with your account is 7.00% per year, and that monthly compounding is

1. You find from your account statement that the nominal interest rate associated with your account is 7.00% per year, and that monthly compounding is being applied to your account. What is the effective annual interest rate?

2.What is the present worth of the following stream of cash flows? An annuity that starts 7 years from now and pays $5,000 per year for 4 years (4 payments of $5,000). Assume 7% interest rate. (Note: nothing is paid in years 1-7. The first payment is received at the end of year 8. The last payment is received at the end of year 11.)

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