7. How much would you have to deposit today if you wanted to have $60,000 in...

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7. How much would you have to deposit today if you wanted to have $60,000 in 5 years? The annual interest rate is 9%. 8 8. Would you rather have $463 now or $1,000 10 years from now? Assume that you can earn 9% on your investments. 9. An investment will pay you $10,000 in 10 years AND it also will pay you $400 at the end of each of the next 10 years. If the annual interest rate is 6%, how much would you be willing to pay today for this type of investment? NOTE: You will need to calculate the PV of the lump sum AND the PV of the payments. Then add the two amounts together. 10. Assume that the average price of a new home is $158,500. If the cost of a new home is increasing at a rate of 10% per year, how much will a new home cost in 8 years? 11. A college student is reported in the newspaper as having won $10,000,000 in the Hoosier Lottery. However, as if often the custom with lotteries, she does not actually receive the $10 million now. Instead she will receive $500,000 at the end of the year for each of the next 20 years. If the annual interest rate is 6%, what is the present value of the amount she won? NOTE: We will ignore the effect of income taxes. 12. As a follow-up to the previous question - if you were offered a lump sum payment of $5,200,000 now OR the annual payments of $500,000 for the next 20 years, what would you choose and why? 7. How much would you have to deposit today if you wanted to have $60,000 in 5 years? The annual interest rate is 9%. 8 8. Would you rather have $463 now or $1,000 10 years from now? Assume that you can earn 9% on your investments. 9. An investment will pay you $10,000 in 10 years AND it also will pay you $400 at the end of each of the next 10 years. If the annual interest rate is 6%, how much would you be willing to pay today for this type of investment? NOTE: You will need to calculate the PV of the lump sum AND the PV of the payments. Then add the two amounts together. 10. Assume that the average price of a new home is $158,500. If the cost of a new home is increasing at a rate of 10% per year, how much will a new home cost in 8 years? 11. A college student is reported in the newspaper as having won $10,000,000 in the Hoosier Lottery. However, as if often the custom with lotteries, she does not actually receive the $10 million now. Instead she will receive $500,000 at the end of the year for each of the next 20 years. If the annual interest rate is 6%, what is the present value of the amount she won? NOTE: We will ignore the effect of income taxes. 12. As a follow-up to the previous question - if you were offered a lump sum payment of $5,200,000 now OR the annual payments of $500,000 for the next 20 years, what would you choose and why?