Q1

You're thinking of buying a car to travel around in, rather than using the train. You can buy an old second hand car for $8,000 now (t=0), and sell it after 8 years for $6,000 (t=8). You estimate that the car will cost $5,500 per year in fuel, insurance, registration and maintenance, paid in arrears, so there will be 8 payments from t=1 to t=8 inclusive. Find the equivalent annual cost (EAC) of the car if the required return is 10% pa.

Select one:

a.

$64,748.8795

b.

$6,999.5521

c.

$6,474.888

d.

$5,750

e.

$4,317.8812

Q2 -

Find the present value of 10 annual payments of $1,500 per annum where the first payment is made 11 years from now. So there are 10 annual payments from t=11 to t=20 inclusive. The discount rate is 8% pa. The present value of these payments is:

Select one:

a.

$372.9679

b.

$4,662.0991

c.

$8,684.8782

d.

$15,025.2049

e.

$18,750.0004