1. A debt obligation can be settled by making a payment of $7,500 now and a final payment of $10,000 in five years. Alternatively, the obligation can be settled by payments of $750 at the end of every three months for five years with the first payment starting at the end of 3 months from today. If interest rate is 10% compounded quarterly, determine the preferred alternative if you are the borrower.

2. Donna and Keith want to sell their business. They have received two offers. If they accept Offer A, they will receive $61,000 immediately and $20,000 in three years. If they accept Offer B, they will receive $37,000 now and $3,000 at the end of every six months for 5 years with the first payment received 6 months from now. If interest is 6.67% annually, which offer is preferable for Donna and Keith?

3. An investment project requires an initial expenditure of $85,000 with a salvage (ending / terminal) value of $30,000. It is estimated the project will have annual returns of $21,000 each and every year for all 4 years. Should the company undertake this project if it wants to achieve a 9% annual rate of return? Find NPV analysis.

4. A $50,000 bond bearing interest at 6.5% bond payable semi-annually matures in 3 years. If the bond is bought when market rates are at 4.5% compounded semi-annually, what is the purchase price of the bond? Please do calculations of each individual cash flow using the table format used in class.

5. A debt of $10,000 with interest at 8% compounded quarterly is to be repaid by equal payments at the end of every six months for two years.

a) Calculate the size of the semi-annual payments.

b) Construct an amortization table for the complete 2 years with dollar amounts to two decimal places i.e. include the pennies. Round your semi-annual payment to the next higher dollar. If you did not get an answer to part a), assume a debt of 20,000, a rate of 10% and a semi-annual payments of $5,650 for 2 years.

c) Calculate the outstanding balance after three payments using formulas. (Reminder: You can confirm your answer by comparing it to the results in your amortization table in b.)