Question
-Suppose that you are evaluating the following investment opportunity. At the end of the the next five years you estimate that you will receive the
-Suppose that you are evaluating the following investment opportunity. At the end of the the next five years you estimate that you will receive the following cash flows, $500, $100, $350, $700, and $550. At the end of every year following year five you will receive a cash flow that is 4% larger than the prior cash flow. If the cost of capital is 11% how much should you be willing to invest in this opportunity?
-Suppose that you take out a loan for $290000 to purchase a house. You are required to make monthly payments, and the APR is 5%. How much interest will you end up paying over the life of the loan (30 year mortgage)?
-Suppose that you will need to save $550000 over the next twenty years to retire comfortably. What constant annual payment (20 payments) will you need to make to save this amount if the you can earn 10% annually?
-What constant payment for the next 10 years (starting 1 year from now, 10 payments) would be equivalent to receiving $400 every other year starting 10 years from now. Assume the annual cost of capital is 8%.
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