10)

You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $1 million in its first year and that this amount will grow at a rate of 3% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 12% per year?

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Part 1

The present value of the new drug is

$enter your response here

million.(Round to three decimal places.)

11)

You have an investment account that started with $3,000 10 years ago and which now has grown to $9,000.

a. What annual rate of return have you earned (you have made no additional contributions to the account)?

b. If the savings bond earns 13% per year from now on, what will the account's value be 10 years from now?

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Part 1

a. What annual rate of return have you earned (you have made no additional contributions to the account)?

Your annual rate of return is

enter your response here%.

(Round to two decimal places.)

12)

You are thinking of purchasing a house. The house costs $350,000. You have $50,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 8% per year. What will be your annual payment if you sign this mortgage?

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Part 1

The annual payment is

$enter your response here.

(Round to the nearest dollar.)

13)

You are saving for retirement. To live comfortably, you decide you will need to save $3 million by the time you are 65. Today is your 21st birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 6%, how much must you set aside each year to make sure that you will have $3 million in the account on your 65th birthday?

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Part 1

The amount to deposit each year is

$enter your response here.

(Round to the nearest dollar.)