The Tip Top Insurance Company will pay an investor $15,000 at the end of each year for 20 years, in exchange for $190,000 paid to Tip Top at the beginning of the first year. What annual interest rate is Tip Top paying on this annuity? [HINT: Calculate the present value of the annuity by each of the given interest rates.]  

2. Today, you are purchasing a 20-year, 6% p.a. annuity at a cost of $120,000. The annuity will pay equal annual payments starting one year from today. To nearer cent, what is the amount of each annual payment?

3. Bigger Burgers Store Ltd is planning a major expansion in 4 years from today. In preparation for this the company is setting aside $35,000 at the beginning of each quarter, starting today, for the next 4 years (that is, 16 payments in total). If the company can earn 6.25% per annum, compounded quarterly, on its savings, how much  money will the company have in four years?

4. Given an interest rate of 5.85% per annum, compounded yearly, what is the value at year t = 8 of a perpetual stream of annual payments of $2,500 which begin at t = 25?

Answer rating: 100% (QA)

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