Question 1:

You found out that now you are going to receive payments of $7,500 for the next 11 years. You will receive these payments at the beginning of each year. The annual interest rate will remain constant at 10%. What is the present value of these payments? Round your answer to the nearest whole dollar.

$53,584

$42,867

$72,338

$48,713

Question 2:

5. Present value of annuities and annuity payments

The present value of an annuity is the sum of the discounted value of all future cash flows.

You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate.

An annuity that pays $500 at the end of every six months

An annuity that pays $1,000 at the beginning of each year

An annuity that pays $500 at the beginning of every six months

An annuity that pays $1,000 at the end of each year

Q3:

You bought an annuity selling at $19,985.54 today that promises to make equal payments at the beginning of each year for the next six years (N). If the annuitys appropriate interest rate (I) remains at 5.00% during this time, then the value of the annual annuity payment (PMT) is .

You just won the lottery. Congratulations! The jackpot is $35,000,000, paid in six equal annual payments. The first payment on the lottery jackpot will be made today. In present value terms, you really won assuming annual interest rate of 5.00%. (Note: Round intermediate calculations to the nearest whole number.)