1. If another Austin Powers movie had been released in 2014 and Dr. Evil, now armed with a financial calculator, wants to hold the Earth ransom for $9,905,971.09, what inflation rate would Dr. Evil use to make his ransom equivalent to $1 million in 1967? (Hint: Inflation is compounded on an annual basis.) 2. When Derek was a small child, his grandfather established a trust fund for him to receive $20,000 on his 35th birthday. Derek just turned 23. What is the value of his trust today if the trust fund earned 7 percent interest? If he had to wait until age 40 to receive the money, what is the present value of the $20,000 to be received in 17 years? 3. You and 11 coworkers just won $12 million ($1 million each) from the state lottery. Assuming that you each receive your share over 20 years and that the state lottery earns a 6 percent return on its funds, what is the present value of your prize before taxes if you request the "up-front cash" option? 4 Anthony and Michelle Constantino just got married and received $30,000 in cash gifts for their wedding. How much will they have on their 25th anniversary if they place half of this money in a fixed-rate investment earning 7 percent compounded annually? Would the future value be larger or smaller if the compounding period was 6 months? How much more or less would they have earned with this shorter compounding period

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1 To calculate the inflation rate Dr Evil would use to make his ransom equivalent to 1 million in 1967 we can use the formula for Future Value with co... View the full answer