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Question 1- You have $ 3 , 6 0 0 to invest today at 7 % interest compounded annually.

a. Find how much you will have accumulated in the account at the end of (1) 2 years, (2) 4 years, and (3) 6 years.
b. Use your findings in part a to calculate the amount of interest earned in (1) the first 2 years (years 1 to 2 ), (2) the second 2 years (years 3 to 4 ),and (3) the third 2 years (years 5 to 6 ).
c. Compare and contrast your findings in part b. Explain why the amount of interest earned increases in each succeeding 2 - y e a r period.

Question 2 - Without referring to the pre-programmed function on your financial calculator ,use the basic formula for present value, along with the given discount rate, r ,and the number of periods, n ,to calculate the present value of $1 in the case shown below:
Opportunity cost, r: 18%, Number of periods, n- 12

Question 3 - Answer each of the following questions.

a. How much money would you have to invest today to accumulate $ 5 , 4 0 0 after 9 years if the rate of return on your investment is 1 1 %?
b. What is the present value of $ 5 , 4 0 0 that you will receive after 9 years if the discount rate is 1 1 %?
c.What is the most you would spend today for an investment that will pay $ 5 , 4 0 0 in 9 years if your opportunity cost is 11% ? d. Compare, contrast, and discuss your findings in part athrough c .

Question 4 -Using the values below, answer the questions that follow.
Amount of annuity - $2,000
Interest rate - 9%
Deposit period (years) - 7

a. Calculate the future value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.

b. Compare your findings in parts a (1) and a (2). All else being identical, which type of annuity ordinary or annuity is preferable as an investment? Explain why.

Question 5 - Consider the following case.
Amount of annuity - $42,000
Interest rate - 7%
Period (years) - 8

a. Calculate the present value of the annuity assuming that it is
(1) An ordinary annuity.
(2) An annuity due.

b. Compare your findings in parts a (1) and a (2).All else being identical, which type of annuity ordinary or annuity is preferable? Explain why.

Question 6 - Marian Kirk wishes to select the better of two 6 -year annuities. Annuity 1 is an ordinary annuity of $ 1 , 9 7 0 per year for 6 years. Annuity 2 is an annuity due of $ 1 , 8 2 0 per year for 6 years.

a. Find the future value of both annuities at the end of year 6 , assuming that Marian can earn (1) 7 % annual interest and (2) 1 4 % annual interest.
b. Use your findings in part ato indicate which annuity has the greater future value at the end of year 6 for both the (1) 7 % and (2) 1 4 % interest rates..
c. Find the present value of both annuities, assuming that Marian can earn (1) 7 %annual interest and (2) 1 4 % annual interest.
d. Use your findings in part cto indicate which annuity has the greater present value for both the (1) 7 % and (2) 1 4 % interest rates.
e.Briefly compare, contrast, and explain any differences between your findings using the 7 % and 1 4 % interest rates in parts band d .


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