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1.You are offered an annuity that will pay you $200 per year for each of the next 7 years. You are trying to decide between

1.You are offered an annuity that will pay you $200 per year for each of the next 7 years. You are trying to decide between this investment opportunity and another opportunity where you could earn 5% on your money with an equal amount of risk. What is the most you should pay for this annuity?

2.What is the present value of a 7-year annuity of $175 plus an additional lump sum of $1,000 at the end of year 7 if the interest rate is 5.5%?

3.What is the cost of an investment that will produce cash flows of $250 at the end of the next 5 years, then an extra lump sum payment of $500 at the end of the 5th year at an interest rate of 5%?

Pease chart out each of the problem elements (ex. N = 10, PV = 500, etc.)

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