1)i)Find the present and future value of $1000 received every month end for 20 years if the interest rate is J12 = 12% p.a.Find the present and future value of $1000 received every month end for 20 years if the interest rate is J12 = 12% p.a.

ii)Find the present value of $10,000 received at the start of every year for 20 years if the interest rate is J1 = 12% p.a. and if the first payment of $10,000 is received at the end of 10 years.

iii)John is currently 25 years old. He has $10,000 saved up and wishes to deposit this into a savings account which pays him J12 = 6% p.a. He also wishes to deposit $X every month into that account so that when he retires at 55, he can withdraw $2000 every month end to support his retirement. He expects to live up till 70 years. How much should he deposit every month into his account?

2)A family buys a house worth $326,000. They pay $75,000 deposit and take a mortgage for the balance at J12=9% p.a. to be amortized over 30 years with monthly payments.

a)Find the value of the mortgage on their house?

b)Find the value of the monthly payment?

c)Find the loan outstanding after making 20 payments?

d)Find the principal repaid in the 21^st payment

3)Explain in a paragraph about when and why would a bond be sold on a premium or discount?

4)Suppose that ABC Ltd is considering purchasing one of three new processing machines. Either machine would make it possible for the company to produce its products more efficiently. Estimates regarding each machine are provided below:

original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows

Machine A $79000 7 years Nil $30,000 $ 7,000

Machine B $110,000 8 years Nil $ 60,000 $ 35,000

Machine C $244,000 10 years $30,000 $58,500 $18,500

If the projects cannot be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital?