08 Jun Question 1. Draw the equivalent cash fl
Question
1. Draw the equivalent cash flow diagram and find the present value for the
following cases: a) (2 points) $10,000 two years from now with an annual interest rate of 8%.
b) (4 points) A series of 6 monthly payments starting at $100 at the end of the first
month increasing by $25 every month with an annual interest rate of 6% compounded
monthly.
c) (4 points) A series of 8 monthly payments starting at $200 at the end of the first
month and increasing by 3% every month with an annual interest rate of 4%
compounded monthly.
2. (10 Points) You will receive $1,000 every quarter for the next 4 years that you will
deposit into your bank. Your bank has guaranteed you an annual return of 2%
compounded semi-annually for the first 2 years and 3% compounded monthly for
the next 2 years. How much will be accumulated after 4 years?
3. (10 points) Nissan is offering a Rogue for $18,588. This can be financed with a
down payment of $2,008.80 and $249 per month for 72 months. What are the
monthly, nominal, and annual effective interest rates for this purchase?
4. (10 Points) You are looking to buy a house for $250,000. You are offered an
annual interest rate of 4.2% compounded monthly for 30 years. What are your
monthly payments?
5. (10 points) An engineering company has determined that $100,000 per year will
be needed to maintain a new bridge. How much money is needed in a fund today to
maintain the bridge indefinitely if the annual interest rate is 4.5%?
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