1. Future value problem: a) At the end of three years, how much is an initial deposit of $100 worth, assuming a compound annual interest rate of (i) 100%? (ii) 10%? (iii) 0%? [9 pts]

b) At the end of five years, how much is an initial $500 deposit followed by five year-end, annual $100 payments worth, assuming a compound annual interest rate of (i) 10%? (ii) 5%? [6 pts]

c) At the end of six years, how much is an initial $500 deposit followed by five year-end, annual $100 payments worth, assuming a compound annual interest rate of (i) 10%? (ii) 5%? [6pts]

d) At the end of 10 years, how much is an initial $100 deposit worth, assuming an annual interest rate of 10% compounded (i) annually? (ii) quarterly? (iii) continuously? [9 pts]

2. You have inherited $25,000 and wish to purchase an ordinary annuity that will provide you with a steady income over the next 12 years. You have heard that the local savings and loan association is currently paying 6% compound interest on an annual basis. If you were to deposit your funds, what year-end equal-dollar amount would you be able to withdraw annually such that you would have a zero balance after your last withdrawal 12 years from now? [10 pts]

3. Consider the situation in #2. If you were to deposit your funds and start to make withdraws at the end of the 2nd year, what year-end equal dollar amount would you be able to withdraw annually such that you would have a zero balance after your last withdrawal? [10 pts]

4. Assume the annual cost of a college education will be $30,000 when your child goes to college in 18 years. You now have $6,500 to invest. What annual rate of interest must you earn on your investment to cover your child's first year cost? [10 pts]

5. US Bank charges 12.00% compounded monthly on its business loan. BankIowa charges 12.40% compounded semiannually. As a potential borrower, which bank would you go to for a new loan? [10 pts]

6. You are considering remodeling your kitchen, where the estimated cost is $45,000. Your realtor friend has told you that it will immediately increase the value of your house by about 90% of the remodeling cost. Experts say that on average, the value of houses in your area will appreciate by about 5% annually. If your opportunity cost is 3.5%, and you plan to sell the house in 6 years, is it a good investment to remodel the kitchen? [15 pts]