3. Future value. A speculator has purchased land along the southern Oregon coast. He has taken out

a ten-year loan with annual payments of $7,200. The loan rate is 6%. At the end of ten years, he believes he can sell the land for $100,000. If he is correct on the future price, did he make a wise investment?

9. Present value. County Ranch Insurance Company wants to offer a guaranteed annuity in units of $500, payable at the end of each year for twenty-five years. The company has a strong investment record and can consistently earn 7% on its investments after taxes. If the company wants to make 1% on this contract, what price should it set on it? Use 6% as the discount rate. Assume it is an ordinary annuity and the price is the same as present value.