For example, if a question asks you how much is the present value for an annuity of 10 years with annual payment of $20 and a discount rate of 7%.

You first have to type:PV = 20{1/0.07 - 1/[0.07(1+0.07)^10]}

Then use the excel function =pv(0.07,10,-20) to find the answer of $140.47.

The portions highlightedin redare the ones you have to type on your assignments.

1.If an insurance company tries to sell you an annuity that promises to pay you $1,000 a year forever, what is the highest price you will be willing to pay for this policy if the discount rate is 8%?

2.What is the value today of 20 annual payments of $50 received at the end of the year if the discount rate is 5%?

3.Continue from the previous question. What is the value today if the payment starts 10 years from now?

4.If you have to pay $450 per month for 3 years for your car loan, how much did you borrow? Assume the interest rate is 6% per year?

5.You plan to buy a car that costs $25,000. If APR is 4.8% and the loan is to be paid of in 60 months, how much is your monthly payment?

6.A cup of Starbucks latte is about $3 including tax. If you quick drinking latte and save the money, how much will you have in 40 years when you retire. Assume 30 days a month and you invest the money monthly in a broad market index fund. The average return is 8% of the stock market for the past thirty years.