7. You want to transfer some of your current wealth into a stream of uniform payments for the next 20 years (starting in one year). A finance company offers to pay you $5,000 per year. Your discount rate (interest rate) is 7%. What is a fair price for you to pay for this stream of cash flows? 8. You plan to retire in 35 years. At the end of each year, you plan on saving $15,000, and your bank pays you 2% annual interest. How much will you have saved by the time you retire? 9. What is the value of a perpetuity paying $100 per year, if the payments start in 11 years and the interest rate is 3% ? To clarify, there are NO payments for the first 10 years then $100 per year thereafter, forever. 10. Your financial advisor comes to you with an investment opportunity that will pay you $10,000 in 7 years, $25,000 in 10 years, and $50,000 in 30 years. She says that you will need to invest $20,000 today. Your required interest rate is 8%. Is this a good investment? 11. The nominal rate quoted in the market is 8% per annum (this is the APR), and interest is paid every month. What is the effective annual rate (EAR)? 12. You deposit $3,500 today into an account guaranteed to pay 5.7% APR, compounded monthly. If you make no other deposits or withdrawals for the next five years, how much will you have in the account five years from today