1. Your grandfather has offered you a choice of one of the three alternatives: $ 5,000 now; $ 1,000 a year for eight years; or $12,000 at the end of eight years, assuming you could earn 15 percent annually, which alternative should you choose?
2. A local bank will pay you $100 a year for your lifetime if you deposit $2,500 in the bank today. If you plan to live forever, what interest rate is the bank paying? b) what is the present value of the money which will you receive Rs. 90000 @ 13% after 7 years?
3. If your uncle borrows $50,000 from the bank at 10 percent interest over the eight-year life of the loan, what equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest (round to the nearest dollar)? How much of his first payment will be applied to interest? To principle? How much of his second payment will be applied to each?