As a graduation present your parents give you Lilliputian bond. You won't receive the first payment, however, for 7 more years. After the first payment, the bond will pay a perpetual stream of $2,000 annual payments. What is the value of this investment if your annual discount rate is 6%? PV = $23,498.68 Your grandmother was recently run over by a reindeer. She has left you a portfolio of Albanian war bonds that will pay you $13,000 per year for 9 years with the first payment being made today. You explain LeBron, your wealthy cousin, that you would have preferred to receive a single cash payment. LeBron offers to buy the trust fund from you. What is the minimum amount you would sell the trust fund for if your discount rate 9% per year? PVA_due = $84,952.65 You would like to purchase a 25-year annuity that pays $5,000 a month with the first payment taking place in one month. How much does this annuity cost if the relevant discount rate is 12% annually with monthly compounding (an APR)? $474,732.76 You would like to purchase a 25-year annuity that pays $5,000 a month with the first payment taking place in one year. How does this annuity cost today discount rate 12% with monthly compounding? $425,514.23 You need to have $2 million to supplement your social security checks at retirement. How much must you save at the end of each month in order to have this target amount at the end of 35 years? Assume you can earn monthly. $311 Your portfolio of Albanian war pays $20,000 per year for 9 years with the first payment being made today. You've decided to invest all the payments in a Bulgarian bank. What is the future value of the investment if you earn 9% annually from the bank? FVA_due = $283,858.59 You would like to help your parents plan for their next year. If you exchange 39,000 today for a 19-year with the first payment to take place in one year, what will your parents' annual cash flow be? Assume 7.5% is the relevant annual interest rate. $3, 916.03