6. Along with your new car in five years, you have decided to buy a new house now. Current mortgage rates are 4% per year, and you have decided to finance the house for 30 years. The house you want is $860,000, and you are able to finance 80% of that. How much will your monthly payment be?

7. Ten years ago you took out a $450,000, 30-year mortgage with an annual interest rate of 5.5 percent.

1) What is the monthly payment?

2)But since you took out that loan, interest rates have dropped. You now have the opportunity to refinance your loan at an annual rate of 4.1 percent over 20 years. You need to know what the outstanding balance on your current loan is so you can take out a lower-interest-rate loan and pay it off. If you just made the 120th payment andhave 240 payments remaining, whats your current loan balance?

3) With refinancing, what much can you save every month?

But since you took out that loan, interest rates have dropped. You now have the opportunity to refinance your loan at an annual rate of 4.1 percent over 20 years. You need to know what the outstanding balance on your current loan is so you can take out a lower-interest-rate loan and pay it off. If you just made the 120th payment andhave 240 payments remaining, whats your current loan balance? With refinancing, what much can you save every month?

8.The initial dividend of a companys share is $1 per year and is expected to grow at an annual rate of 5%. Assume the discount rate is 10%, what is the present value of all the dividends?

9. Suppose you have just won the first prize in a lottery. The lottery offers you two possibilities for receiving your prize. The first possibility is to receive a payment of $10,000 at the end of the year, and then, for the next 15 years this payment will be repeated, but it will grow at a rate of 5%. The interest rate is 12% during the entire period. The second possibility is to receive $100,000 right now. Which of the two possibilities would you take?