Question: offers you an 1. Exercise One: A at the end of each year- for the next 10 years. If the rate is 5.75%, using the

offers you an 1. Exercise One: A at the end of each year- for the next 10 years. If the rate is 5.75%, using the annuity discount formula, (a) what is the fair representative from Fiterman Insurance Company fr annuity that pays $2,500 interest rate i s 5 ay? (b) Suppose they modify the deal, and offer you an annuity that pays the same coupon, but on a semi-annual basis, wha instrument? hat is the fair price of this 2. Exercise Two: After winnin annually for the next 30 installments. If ears -should you choose your award to be paid in future ym ent be? Assume that the interest rate is 4.15%. E the lottery, you are promised to receive $500,000 semi- you installments. o today-how much would this pa you rather have the total amount disbursed in a single lump sum 3. Exercise Three: Su $1,200 guarterly in an interest bearing account with an annual interest rate of 4.25%. If you plan to start your business in 10 years, how much money will you have ppose you want to start your own business, and you plan to invest then? Exercise Four: As part of your early retirement plan, and you plan to save $1,500 monthly in an interest bearing account with an annual interest rate of 4.25%. If you plan to retire in 30 4. years, how much money will you have then for retirement

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