a. Your phone just buzzed, and guess what? You won the big lotterythats $1,500,000!! But wait a second, on the back of your ticket theres some small print that you hadnt noticed. It says youll eventually get a total of $1.5 million, but it will come to you as 12 equal annual payments, with the first coming tomorrow...on TV! Within minutes of getting the news, your phone starts buzzing again. Some guy is offering to buy the lottery ticket from you. If you assume interest rates will be around 8% over the course of the payments, what would you be willing to sell it for?

b. Youve just had a successful experience on the hit television game show, A Taste for Trivia. Your prize? Youve won a permanent supply of Heinz Vegetarian Baked Beans. This means youll get a 96-count case of 16oz cans delivered annually to your doorstep until the day you die, at which point the cases will be delivered to your heirs for...well, eternity (or until our sun implodes, whichever comes first). A case currently sells for $175 (wholesale) and were going to assume that price will hold steady for at least the next 82 million years ( ). Well further assume you dont like baked beans and want to sell your winnings to a grocery store. How much is your Curse of the Baked Beans worth to a store owner, if prevailing interest rates over the next 82 million years are expected to be 4%?

c. Your best friend has arranged to borrow $4000 from you. The deal is that the money is to be paid back in five years time. She has agreed to pay you $850/year, with payments due at the end of each year. The question, then, is this: What interest rate have you implicitly agreed to?

d. Starting this yearin fact, starting todayyou plan to start saving money for cosmetic surgery (a new head to put on your shoulders). Youll be putting $2500 per year into an investment that is expected to earn 8% per annum. If you do this, how much can you expect to have upon making the eighth deposit?

e. Youve been hired as a bookkeeper for a non-profit environmental organization. The books are a mess! Thankfully, the payables appear to be under control, but some of the loans are confusing. For instance, a wealthy donor has provided quite a number of contributions, but also a loan. The organization received $150,000 loan from this person in 2001, at an interest rate of 4% interest. No annual interest payments are to be paid on itwhen it comes due its simply to be paid back as a single lump sum of $400,000. Okay...sounds good, but when is this loan coming due? Is it still an active loan, or has it been paid off already? Youre baffled, and so you sit down to do the math to try to figure out how many years the loan must have been made for....