You have a chance to buy an annuity that pays $8,000 at the beginning of each year

Fantastic news! We've Found the answer you've been seeking!

Question:

You have a chance to buy an annuity that pays $8,000 at the beginning of each year for 7 years.You could earn 4.5% on your money in other investments with equal risk (Opportunity cost/Discount Rate).What is the most you should pay for the annuity?

Bow Corporation's sales last year were $525,000, its operating costs were $371,000, and its interest charges were $12,500. What was the firm's times-interest-earned (TIE)?

Problems: Solve the following problems. Ensure your answers are thorough and address the question being asked. Show which formula you would use to solve the problem, note the calculator input key and values and solve using your calculators to earn full credit. (Each question is valued at 10 points. Problems Section represents 80% of the exam value).

3. Suppose your credit card issuer states that it charges a 15.00% nominal annual rate, but you must make monthly payments, which amounts to monthly compounding. What is the effective annual rate (EFF%/EAR%)?

4. Suppose you deposited $5,000 in a bank account that pays 7.25% with daily compounding based on a 360-day year.How much would be in the account after 8 months?

5. Suppose you borrowed $14,000 at a rate of 10.0% and must repay it in 5 equal installments at the end of each of the next 5 years.

A) How much are the annual payments?

B) How much interest would you have to pay in the first year?

6. A product sells for $750 in the United States.The spot exchange rate is $0.606 to 1.00 Swiss francs.If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?

7. Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 0.64 euros.What is the cross rate of Swiss francs to euros?

8. Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return.In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return.In the 90-day forward market, 1 British pound equals $1.65.If interest rate parity holds, what is the spot exchange rate ($/)?