Problem #1 Suppose you borrow $ 20,000 at a 9% compounded monthly, for 5 years. Knowing that 9% represents the market interest rate, monthly payment in current dollars will be $ 415.17. If the average monthly rate of overall inflation is expected to be 0.5%, what is the annual equivalent of equal monthly payments in constant dollars? Set the value for the periods N in months and the effective interest per month. Set the economic graph only the values that are necessary to establish the relationship of the annuity is sought. Set the value of i(interest without inflation) deriving from the relationshipi=i+f+ (i') (f Determine the annuity according to the developed graphic and using the interest without inflation i' Problem #2 A couple wants to save for college expenses of his daughter. Daughter will enter college in eight years and will need $ 40,000, $41,000, $42,000 and $ 43,000 in today's dollars for four years of college. Assume that these college payments will be made at the beginning of the year of study. The future overall inflation rate is estimated at 6% per annum and the rate of inflation free rate is 5%. What is the current dollar amount equal to the couple must save each year until her daughter go to college? Set the value of i' Inflation interest) from the relationship i=i*+ f + (i') ( f) Use the present value ratio P=F (1+i)_n to convert values from year 8 to 11 at present values. Add the values present for a single present value. Use the present value ratio P=F (1+i)n to convert values from year 8 to 11 at present values. Add the values present for a single present value. Use the following relationship to determine annuity present value obtained in the last step A P [i (1 n (1 1 Use relationships to determine the values that are requested. Use a level of inflation of 3% AnAn 1 f AR An(1fy" A'n A n 150 0 206 200 1 250 3 274.54 Determine the present value of current flows at an interest rate of 4%