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Finance Problems

Finance Problems

Sarah Wiggum would like to make a single investment and have $1.6 million at the time of her retirement in 35 years. She has found a retirement fund that will earn 4% annually. How much will Sarah have to invest today? If she earned an annual return of 18%, how soon could she then retire?

 

How many years will it take for $500 to grow to $1,051.82 at 10% compounded annually?

 

What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity?

 

To pay for your education you have taken out $28,000 in student loans. If you make monthly payments over 13 years at 6% compounded monthly, how much are your monthly student loan payments?

 

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:

 

End of year                            A                          B                             C

 

1                                            $   1,000                $   1,000                 $   5,000

 

2                                                 2,000                     1,000                      5,000

 

3                                                 3,000                     1,000                     (5,000)

 

4                                                 (4,000)                   1,000                     (5,000)

 

5                                                 4,000                      3,000                    15,000

 

What is the present value of each if these three investments if the appropriate discount rate is 13%?

 

 

 

 

 

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