ANSWER USING TI BAII plus CALCULATOR: SHOW ALL WORK!

1. Ten years ago, you put $150,000 into an interest-earning account. Today it is worth $300,000. With annual compounding, what is the effective annual interest earned on the

account?

Answer:__________

2. Your friend has a trust fund that will pay him a lump sum of $1,000,000 at the end of 10 years. Your friend, however, wants his money today. He promises to sign his trust fund over to you if you give him some money today. You require a 14% interest rate on this type investment. Assuming annual compounding, how much would you be willing to pay him today?

Answer:__________

3. At the end of 5 years from now, your friend wants to have $150,000 saved for a down payment on a house. He expects to earn 6%compounded monthlyon his investments over the next 5 years. How much would your friend have to put in his investment account each month to reach his goal?

Answer:__________

4. Your friend just won the lottery. He has a choice of receiving $250,000 at the end of each year for the next 20 years or a lump sum today. The lottery uses an 8% annual discount rate. What lump sum would your friend receive if he chose this option?

Answer:__________

5. A borrower obtains a $450,000 reverse annuity mortgage with monthly payments over 10 years. If the interest rate of the mortgage loan is 7.50%, what is the monthly payment

received by the borrower?

Answer:__________