Exercise You uncle has just announced that he is going to give you 57.500 per year at the end of each of the nest 4 years If the relevant este is what is the value today of this promise Exercise 2 What is the prest value of a series of payments, each $1.200, to be made at the end of years 1.2.249 Awame that the interest rate is 19% (A) Take cach amount and calculate its pret value in year 4 (B) Use the EXCEL PV function Ener You are thinking about buying a $1.000 boedsued by the Appalachian Development Authority. The bond will pay $450 interest at the end of each of the next five years At the end of year 6, the bead will pay $1.450 (this isi face value of $1,000 plus the interest. If the relevant discount rate is 115, how much is the present value of the bood's future payments Exercise 4 Assuming that the interest rate is 7%, which of the following is more valuable ( S. Beday (b) 59.000 the end of five years (C) 000th of four years. (d) $400 a year in perpetuity (meaning forever, with the first payment at the end of this year You are the CFO of Termination, Inc. Your company has 60 employees, cachearing 540,000 per year. Employee salaries growt % per year. Starting from next you, and every second year thereafter, eight employees retired now employees are reci Yeur compty has in place a retirement plan that entitles retired workers to M alpension equal to their annual salary at the moment of retirement Life expectancy is twenty years after retirement, and the r e is a year-end. The fun on insiment is 10 y. What is the total value of your presion it? Exercise 1 You just put $500 in the bank and you intend to leave it there for ten years. If the bank pays you 13% interest per year, how much will you have at the end of ten years! Exercise 2 Your generous grandesther has just announced that she has opened a savings account for you with a deposit of $11,500. Moreover, she intends to make more similar gifts, at the end of this year, next year, and so on. If the savings account pays 8% interest, how much will you have accumulated at the end of 10 years (A) Take cach amount and calculate its future value in your 10 (B) Use the EXCELEV function Exercise 3 You receive a $17.500 sining bonus from your new employer and decide to invest it for two years. Your banker suggests two alternatives, both requiring a commitment for the full two years The first alternative will earn 9% per year for both years. The second alternative carns 7% for the first year, and 11% for the second year. Interest compounds annually Which should you choose Exercise 4 John is turning 13 today. His birthday resolution is to start saving toward the purchase of a car that he wants to buy on his 18th birthday. The car costs $13.000 today, and he expects the price to grow at 1% per year. John has heard that a local bank offers a savings account that pays an interest rate of 6% per year. He plans to make six contributions of $1.000 each to the savings account the first contribution to be made today, he will use the funds in the account on his 18th birthday as a down payment for the car, financing the balance through the car dealer He expects the dealer to offer the following terms for financing seven equal yearly payments (with the first payment due one year after he takes possession of the car and an annual interest rate of 7% (A) How much will John need to finance through the dealer (B) What will be the amount of this yearly payment to the dealer? Exercises Michael is considering his consumption habits, trying to figure out how to save money. He realizes that he could save 54 every day by dering regular coffee instead of late at the local coffee shop Since he buys a cup of coffee every workday, this works out to $20 per week, which amounts to saving of $1,040 per year (A) If Michaelis 25 today and retires at age 65. how much money will be have accumulated from savings on coffee vervus latte? Assume that the annual interest rate is 6% wned that the S1010 savings accur the end of each year (B) Michael was astounded at the answer to part (A) of this problem. He realized he had more wasteful habits, and he made a list of possible savings to see how much richer he could be at age 65 What are the rewards of Michael's frugality? What are the rewards of Michael's frugality? Hem Weekly savings Future value at Yearly savings Putu W age 65 Lame versus regulai Delivers brown! Excess alcohol Carettes Candy Excess junk food Cell phone chaty Wasted groceries Restaurants fast fox Wasted energy hex Movies versus hoc Expensive cable TN Wasted gasoline on Wasteful spending Savings TOTAL 10