QUESTION 2:

Daigo Dojima recently invested $7,500 in a project that is promising to return 6.25 percent per year. The cash flows are expected to be as follows:

End of Cash Y ear Flow 1 $1000

2 950 3 875 4 ??? 5 850

Note that the 4th year cash flow is unknown. Assuming the present value of this cash flow stream is $7,500 (that is, CF0 = -7500), what is the missing cash flow value (that is, what is the cash flow at the end of the 4th year)?

QUESTION 3:

How much does Savannah need to save at the end of each of the next twenty-five years (with the first deposit made at the end of year 1) to have an income of $40,000 per year for thirty years starting at end of year twenty-six. The appropriate interest rate is 6.0% p.a.

QUESTION 4:

To buy an engagement ring for his girlfriend, Martin is considering a loan of $10,000 from Tiffney. He will pay 36 monthly installments of $550 each. What is the effective annual rate of interest (EAR) that Tiffney is charging?