Question
8. Next year you will begin receiving $180 per year in perpetuity from a family trust fund (first payment is exactly 1 year from today).
8. Next year you will begin receiving $180 per year in perpetuity from a family trust fund (first payment is exactly 1 year from today). You have decided to discount these cash flows at a constant interest rate of 6.1%. What is the present value today of these future cash flows? (Hint: draw a time line to illustrate exactly the cash flows for this problem.) Answer to 2 decimal places.
9. Your salary next year is expected to be $40,000. Assume you expect your salary to grow at a steady rate of 3% per year for another 22 years. If the appropriate cost of capital (aka discount rate) is 9.6%, what is the PV today of your future salary cash flow stream? For simplicity, assume the salary amounts are at the end of each of the next 22 years. Answer to zero (0) decimal places.
10. You have just taken out a 30 year, $120,000 mortgage on your new home. This mortgage is to be repaid in 360 equal monthly installments. If the stated (nominal)annual interest rate is 11.06percent, what is the amount of the INTEREST portion of the FIRST monthly installment?
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