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1. A firm issues a $10 million debt obligation that pays 7.3% per year over four years. How much will it have to pay in four years? 2. Suppose that a life insurance company has guaranteed a payment of $14 million to a pension fund 4.5 years from now. If the life insurance company receives a premium of $10.4 million from the pension fund and can invest the entire premium for 4.5 years at an annual interest rate of 6.25%, will it have sufficient funds from this investment to meet the $14 million obligation? A B E F 1. A firm issues a $10 million debt obligation that pays 7.3% per year over four years. How much will it have to pay in four years? PV 1 2 3 4 5 6 Rate Maturity (yrs.) FV 2. Suppose that a life insurance company has guaranteed a payment of $14 million to a pension fund 4.5 years from now. If the life insurance company receives a premium of $10.4 million from the pension fund and can invest the entire premium for 4.5 years at an annual interest rate of 6.25%, will it have sufficient funds from this investment to meet the $14 million obligation? PV 7 8 9 10 11 12 13 14 Rate Maturity (yrs.) FV Amount required Over/(Under)