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2.5 (Future value of an ordinary annuity) What is the future value of each of the following streams of payments? (a) $500 a year for
2.5 (Future value of an ordinary annuity) What is the future value of each of the following streams of payments? (a) $500 a year for 10 years compounded annually at 5% (b) $100 a year for five years compounded annually at 10% (c) $35 a year for seven years compounded annually at 7% (d) $25 a year for three years compounded annually at 2% 2.6 (Present value of an ordinary annuity) What is the present value of the following annuities? (a) $2500 a year for 10 years discounted to the present at 7% (b) $70 a year for three years discounted to the present at 3\% (c) \$280 a year for seven years discounted to the present at 6% (d) $500 a year for 10 years discounted to the present at 10% 2.7 (Annuity payments) The Aggarwal Corporation needs to save $10 million to retire a $10 million mortgage that matures in 10 years. To retire this mortgage, the company plans to put a fixed amount into an account at the end of each year for 10 years. The Aggarwal Corporation expects to earn 9% interest annually on the money in this account. What equal annual contribution must the firm make to this account to accumulate the $10 million by the end of 10 years? 2.8 (Annuity number of periods) Alex Karex has taken out a $200000 loan with an annual interest rate of 8% compounded monthly to pay for an extension to his house. If the most Alex can afford to pay towards his loan is $1500 per month, how long will it take to pay off the loan? How long would it take for him to pay off the loan if he can pay $2000 per month? 2.9 (Annuity interest rate) Your parents have just phoned to ask you for some advice. An insurance agent has contacted them and offered them the opportunity to purchase an annuity for $21074.25 that will pay them $3000 per year for 20 years. Your parents do not have the slightest idea what return they would be making on their investment of $21074.25. What rate of return would they be earning? 2.10 (Present value of an annuity due) Determine the present value of an annuity due of $1000 per year for 10 years discounted to the present at an annual interest rate of 10%. What would be the present value of this annuity due if it were discounted at an annual rate of 15%
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