1. Do Self- Test Problem 5-2 (b) (c) on Textbook p.232. Below is a summary of the problem.

You have the opportunity to invest in either of two annuities. Annuity X is an annuity due that makes 6 equal annual payment of $9,000. Annuity Y is an ordinary annuity that makes 6 equal annual payment of $10,000. Assume that you can earn 15% on your investment

(1) find the future value after 6 years for both annuities

(2 ) use your finding in part (1) to indicate which annuity is more attractive. Why?

2. Do Self-Test Problem 5-4 on Textbook p.233. Below is a summary of the problem.

You wish to accumulate $8,000 by making equal, end-of-year deposits over the next 5 years. If you can earn 7% on your investment, how much must you deposit at the end of each year to meet this goal?

3. Do Warm-up Exercise E 5-2 on Textbook P. 233. Below is a summary of the problem.

You just won $2.5 million in the state lottery. You are given the option of receiving a lump sum of $1.3 million now, or you can elect to receive $100,000 at the end of each of the next 25 years. If you can earn 5% annually on your investments, which option should you take?

4. Do Problem 5-48 on Textbook p.246 for both annual payment and monthly payment. Below is a summary of the problem

You borrowed $45,000 at 4% annual interest rate that you must repay over 3 years. The loan is amortized into three-equal end-of-year payments.

(1) Calculate annual payment amount

(2) Prepare a loan amortization schedule

(3) If you make equal monthly payment for 36 months, calculate monthly payment amount and prepare a monthly loan amortization schedule

(4) How much is total interest charge for 3 years, if you make annual payment? How much is total interest charge for 36 months, if you make monthly payment? Do you pay more interest with annual payment or monthly payment? Why?