Q1. You are buying a house at $1,200,000 today. What is the expected value of this house 30 years from now if the value (price) of this house appreciates by 4% each year compounded annually? Ignore any other factor/s not mentioned in this case.

a. FV = 600,000 * [(1 + .04)^30] = 1,946,038

b. FV = 1,200,000 * [(1 + .04)^30]

c. Less than $2,000,000

d. More than $3,000,000

e. Both b and d

Q2. You parents need $50,000 each year for their retirement for the next 20 years. The Prudential Insurances offers an annuity contract that yields 6% each year. They need to buy an annuity contract today in the amount of:

a. $286,748.03

b. $573,496.06

c. More than $600,000

d. Less than $200,000

e. None of the above