The Good Life Insurance Co. wants to sell you an annuity which will pay you $730 per quarter for 25 years. You want to earn a minimum rate of return of 5.8 percent. What is the most you are willing to pay as a lump sum today to buy this annuity?

	$38,411.83
	$44,072.46
	$39,628.47
	$38,047.43
	$45,359.57

You want to buy a new sports car from Muscle Motors for $55,000. The contract is in the form of a 60-month annuity due at a 9.50 percent APR.

Required:

What will your monthly payment be?

rev: 09_17_2012

$1,168.95

$1,123.11

$1,155.10

$1,088.73

$1,146.03

Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $24,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 15 years at an estimated cost of $905,000. Third, after he passes on at the end of the 25 years of withdrawals, he would like to leave an inheritance of $750,000 to his nephew Frodo. He can afford to save $2,400 per month for the next 15 years.

Required:

If he can earn a 12 percent EAR before he retires and a 11 percent EAR after he retires, how much will he have to save each month in years 16 through 30?

rev: 09_17_2012

$2,828.83

$4,235.62

$5,035.76

$2,886.56

$2,944.29