For chapter 4 complete questions #1 - #8, #18, #19

C. 6% APR compounded daily? 17. Harry promises that an investment in his firm will double in six years. Interest is assumed to be paid quarterly and reinvested. What effective annual yield does this represent? 18. Suppose you know that you will need $2,500 two years from now in order to make a down payment on a car. a. BankOne is offering 4% interest (compounded annually) for two-year accounts and BankTwo is offering 4.5% (compounded annually) for two-year accounts. If you know you need $2,500 two years from today, how much will you need to invest in BankOne to reach your goal? Alternatively, how much will you need to invest in BankTwo? Which bank account do you prefer? b. Now suppose you do not need the money for three years. How much will you need to deposit today in BankOne? BankTwo? 19. Lucky Lynn has a choice between receiving $1,000 from her great-uncle one year from today or $900 from her great-aunt today. She believes she could invest the $900 at a one-year return of 12%.Questions and Problems 1. If you invest $1,000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in the interim? 2. a. If you invest $100 every year for the next 20 years starting one year from today and you carn interest of 10% per year, how much will you have at the end of the 20 years? b. How much must you invest each year if you want to have $50,000 at the end of the 20 years? 3. What is the present value of the following cash flows at an interest rate of 10% per year? a. $100 received five years from now. b. $100 received 60 years from now. c. $100 received each year beginning one year from now and ending 10 years from now. d. $100 received each year for 10 years beginning now. e. $100 each year beginning one year from now and continuing forever. (Hint: You do not need to use the financial keys of your calculator for this, just some common sense.) 4. You want to establish a "wasting" fund, which will provide you with $1,000 per year for four years, at which time the fund will be exhausted. How much must you put in the fund now if you can earn 10% interest per year' 5. You take a one-year installment loan of $1,000 at an interest rate of 12% per year (1% per month) to be repaid in 12 equal monthly payments. a. What is the monthly payment? b. What is the total amount of interest paid over the 12-month term of the loan? 6. You are taking out a $100,000 mortgage loan to be repaid over 25 years in 300 monthly payments. a. If the interest rate is 16% per year, what is the amount of the monthly payment? b. If you can only afford to pay $1,000 per month, how large a loan could you take? c. If you can afford to pay $1,500 per month and need to borrow $100,090, how many months would it take to pay off the mortgage? d. If you can pay $1,500 per month, need to borrow $100,000, and want a 25-year mortgage, what is the highest interest rate you can pay? 7. In 1626 Peter Minuit purchased Manhattan Island from the Native Americans for about $24 worth of trinkets. If the tribe had taken cash instead and invested it to earn 8% per year compounded annually, how much would the Indians have had in 1986, 360 years later? 8. You win a $1 million lottery, which pays you $50,000 per year for 20 years. How much is your prize really worth, assuming an interest rate of 8%% per year? 9. Your great-aunt left you $20,000 when she died. You can invest the money to earn 12% per year. If you spend $3,540 per year out of this inheritance, how long will the money last