assignment 2

1. Suppose you just won the rst prize in a lottery. The lottery offers you two possibilities for receiving your winnings. The rst option is to receive a payment of $10 000 at the end of the year, and then, for the next 15 years, this payment will be repeated, growing at a rate of 5% annually. The interest rate is 12% during the entire period. The second choice is to receive $100 000 right now. Which of the two alternatives should you take? 2. You decide to buy a piece of equipment for $11 500. The equipment is expected to last for 10 years, and you want to have it completely paid off 2.5 years before it becomes unusable. Current loan rates are 6.3% compounded annually. What is the size of your semi-annual payment? 3. You decide to buy a piece of equipment for $11 500. The equipment is expected to last for 10 years, and you want to have it completely paid off 2.5 years before it becomes unusable. Current loan rates are 6.3% compounded annually. What is the size of your semi-annual payment? 4. Josie borrowed $8000 compounded monthly to help nance her education. She contracted to repay the loan in monthly payments of $300 each. If the payments are due at the end of each month and interest is 4% compounded monthly, how long will Josie have to make monthly payments