1. Ancelet Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent?

1. If you can obtain a 30-year mortgage at 6.5%, what is your monthly payment on a $250,000 mortgage?
2. If you can obtain a 15-year mortgage at 6.5%, what is your monthly payment on a $250,000 mortgage?
3. You wish to have $2,500,000 in your investment account forty years from now when you retire. You plan to accumulate this sum by making end-of-year deposits into a mutual fund. If the fund earns a rate of return of 12%, how much must you contribute each year?
4. If you make weekly deposits to the retirement fund mentioned above, how much must you contribute each week?
5. How long will it take you to save for a $20,000 down payment on a home if you make yearly deposits of $7,500 and the bank is paying you 5% interest?
6. You contributed $3,000 per year to your Roth IRA account over the past twenty-five years. The balance in your account is now $500,000. What compound annual rate of return have you achieved?
7. The University wishes to establish an endowment fund that will generate $50,000 per year in scholarships. If they can earn a rate of return of 5.5%, how much will they have to raise?
8. How much would they have to raise if they could earn a rate of return of 5.5% compounded daily?
9. Your credit card company charges you 18.99%, but requires you to make monthly payments. What is the effective annual rate you are paying?
10. You have compiled the following information on 1-year CD rates from three local banks. Which bank will you choose to deposit your money?

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1. I am looking ahead to my retirement and want to be able to retire at 70 and hope to live to 95 and make $3200 a month from an account compounding monthly at 4.5%. I am currently 27 and I am going to deposit $1000 at the beginning of each quarter until I am 70 in an account that pays 8.5% and is compounded quarterly. Will I have enough to make it happen and by how much am I above or below?
2. I am setting up a fund for my son to go to college. I figure that he will need $50,000 by the time he is old enough to go to college. I found an account that pays 5.75% compounded monthly. How much will my monthly payment be to get my son set up for college in 17 years? How much interest will the account accrue?
3. Find the present value of an ordinary annuity that lasts five years and pays $3,000 at the end of each month, using a nominal interest rate of 3% compounded monthly. Then repeat the problem using an annual effective discount rate of 3%. Which is higher? Why?
4. Steve Wong wishes to save for his retirement by depositing $1,200 at the beginning of each year for thirty years. Exactly one year after his last deposit he wishes to begin making annual equal withdrawals until he has made twenty withdrawals and exhausted the savings. Find the amount of each withdrawal if the interest rate is 5% during the first thirty years but only 4% after that.
5. What amount must be deposited today in an account paying 6% per year, compounded monthly in order to have $2,000 in the account at the end of 5 years?
6. A loan of $5,000 is to be repaid in equal monthly payments over the next 2 years.  The first payment is to be made 1 month from now.  Determine the payment amount if interest is charged at a nominal interest rate of 12% per year, compounded monthly.
7. You have decided to begin a savings plan in order to make a down payment on a new house. You will deposit $1000 every 3 months for 4 years into an account that pays interest at the rate of 8% per year, compounded monthly.  The first deposit will be made in 3 months.  How much will be in the account in 4 years?
8. Determine the total amount accumulated in an account paying interest at the rate of 10% per year, compounded continuously if deposits of $1,000 are made at the end of each of the next 5 years.
9. A firm pays back a $10 000 loan with quarterly payments over the next 5 years.  The $10 000 returns 4% APR compounded monthly.  What is the quarterly payment amount?

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