# What is the present value of this perpetuity?

Assignment One: (Please complete questions and show work)

1 You have a goal of purchasing a home in 6 years. You anticipate needing a $12,000 down payment. If you can earn 7% interest, how much will you need to invest today to reach your goal?

2 After working for 10 years, you would like to take off for a month and travel Europe. You will need a total of $20,000 for your travel and living expenses. How much will you need to deposit at the end of each work year in an account that earns 6% interest to make this dream a reality?

3 You have $2,000 and plan to purchase a 4-year certificate of deposit (CD) that pays 3.5% interest compounded annually. How much will you have when the CD matures?

4 You deposit $1500 in an account at the beginning of each year for 20 years. If your account earns 6.5% interest, what is the value of your account after 20 years?

5 What is your rate of return if you invest $1,500 in a stock that is valued at $10,000 after 8 years?

6 You have $5,000 today. Your account earns 4% interest. How long will it take for your account to grow to $9,000?

7 You are thinking about investing in a perpetuity. You have a required return of 6%. This perpetuity pays $1,500 at the end of each year. What is the present value of this perpetuity?

8 You are looking at a loan that offers an APR of 10% for 5 years compounded semiannually. The total number of compounding periods is __________ at _____________% interest.

9 You just won the lottery! The payout is $500,000 a year paid at the end of the year for the next 20 years. If you took the lump-sum of this annuity today assuming the annuity earns 4% interest, how much would you receive?

10 You wanted a new car, so you borrowed $40,000 at 3.5% interest for five years. What is your annual payment if payments are due at the end of each year?