1.  If the applicable discount rate is 3.7%, what is the present value of the following stream of cash flows? Assume that the cash flows occur at the end of the year

Cash Flow Year 1: $2,000
Cash Flow Year 2: $5,000
Cash Flow Year 3: $8,000

2. An investment is expected to earn you $5,000 each quarter for the next 12 years. If the appropriate discount rate is 9%, how much is this investment worth today? 

3.  If you deposit $13,000 each year for the next 13 years into an account paying 2.5%, how much in interest will you earn over that time period? 

4. You have $186,000 in an account today paying 2.7% interest. What are the monthly withdrawals you can make out of this account so that it lasts you exactly 16 years?

5. In 29 years, you would like to have a retirement nest egg of $1.8 million. Assuming your savings earn 5.7%, how much should you save at the end of each year in order to reach your goal in 29 years? 

6.  Suppose you make the following deposits into an account earning 2.1%: 

$12,000 today followed by $5,000 each year for the next 7 years (so the last cash flow is at year 7). How much will you have in the account after 11 years? 

7.  If you take out a balloon loan of $33,000 for 6 years at an interest rate of 9.0% and pay it all off at the end, how much interest will you have paid in total? 

Answer rating: 100% (QA)

1 To calculate the present value of the cash flows we need to discount each cash flow by the applicable discount rate and then add up the present values Using the formula for the present value of a ca... View the full answer