6) You have saved $47,000 for college and wish to use $15,000 per year. If you use the money as an ordinary annuity and earn 6.15% on your investment, how many years will your annuity last? Use a calculator to determine your answer. 6) _______

7) What is the present value of a lottery paid as an annuity due for twenty years if the cash flows are $250,000 per year and the appropriate discount rate is 7.50%? 7) _______

8) You just won a lottery - CONGRATULATIONS! Your parents have always told you to plan for the future, so since you already have a well-paying job you decide to invest rather than spend your lottery winnings. The payment schedule from the lottery commission is $100,000 after taxes at end of year one and 19 more payments of exactly $100,000 after taxes in equal annual end-of-the-year deposits (i.e., the first of the next 20 deposits is one year from today) into your account paying 7% compounded annually. How much money will be in your account after the last deposit is made? 8) _______

9) What is the present value today of an ordinary annuity cash flow of $3,000 per year for forty years at an interest rate of 6.0% per year if the first cash flow is six years from today? 9) _______

10) Suppose you invest $1,000 today, compounded quarterly, with the annual interest rate of 5.00%. What is your investment worth in one year? 10) ______

11) Ten years ago Brick Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Brick Signs bonds is now 9%. Given this information, what is the price today for a Brick Signs bond? 11) ______

12) Thomson Biometrics Inc., has outstanding $1,000 face value 8% coupon bonds that make semiannual payments, and have 14 years remaining to maturity. If the current price for these bonds is $987.24, what is the annualized yield to maturity? 12) ______

13) PGC Inc. just issued zero-coupon bonds with a par value of $1,000. If the bond has a maturity of 15 years and a yield to maturity of 10% compounded semi-annually, what is the current price of the bond if it is priced in the conventional manner? 13) ______

14) Morning Glory Enterprises Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 15%, what is the firm's current price per bond? 14) ______

15) The Super Bike Company just paid an annual dividend of $1.12. If you expect a constant growth rate of 4% and have a required rate of return of 13%, what is the current stock price according to the constant growth dividend model? 15) ______

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