You plan to deposit $200 in a bank account now and $600 at the end of one year. If the account earns 3% interest per year, what will the balance be in the account right after you make the second deposit?

Question 2:  You have just received a windfall from an investment you made in a friend's business. She will be paying you $49,725 at the end of this year, $99,450

at the end of next year, and $149,175 at the end of the year after that (three years from today). The interest rate is 4.1% per year.

a. What is the present value of your windfall? (Round to the nearest dollar.)

b. What is the future value of your windfall in three years (on the date of the last payment)?

 
Question 3:

You have decided to buy a perpetual bond. The bond makes one payment at the end of every year forever and has an interest rate of 5%. If the bond initially costs$2,000, what is the payment every year? (Round to the nearest dollar.)

Question 4: You are thinking of building a new machine that will save you $1,000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 3% per year forever. What is the present value of the savings if the interest rate is 4% per year?

Question 5; You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $3 million in its first year and that this amount will grow at a rate of 6% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 9% per year?

Answer rating: 100% (QA)

Answer 1 The interest rate is 3 per year Thus the balance of the account at the end of one year will ... View the full answer