Question
(TCO 5) Janes parents have created a savings account to save for her college education. If they invest $1,000 a year at 6% interest beginning
(TCO 5) Janes parents have created a savings account to save for her college education. If they invest $1,000 a year at 6% interest beginning on her first birthday, how much will be in the account when she reaches age 18?
(TCO 5) You own a contract that promises an annuity cash flow of $250 year-end cash flows for each of the next 3 years. (Note: The first cash flow is exactly 1 year from today). At an interest rate of 8%, what is the present value of this contract?
(TCO 5) You have been accepted into a prestigious private university in Illinois for your doctoral program. Congratulations! Since no one from this school has ever graduated in only 4 years, you anticipate that you will need to make 11 semi-annual tuition payments of $35,000 each with the first cash flow 6 months from today. If you choose to discount these cash flows at an annual rate of 8%, what is the present value cost of tuition to attend your university of choice?
(TCO 5) You are about to purchase a new car from a dealer who has a new and unusual payment plan. You have the choice to pay $29,000 cash today or $32,000 in 4 years. If you have the opportunity to borrow the cash price value of the car at a rate of 3.0% and repay the loan in a lump sum in 4 years, which option should you take and why?
(TCO 5) Which choice has a greater present value if we assume a required rate of return of 8%? (1) A lump-sum cash flow today of $248.69 (2) $100 cash flows occurring 1, 2, and 3 years from today (3) A single cash flow of $331 3 years from today
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