I have to answer this problems relating to Math of Investment.
Can anybody help me pls!
I just want to check if my answers are right, except for #1 which I don't have.
1. Assume you are to receive a 20-year annuity with annual payments of $50. The first payment will be received at the end of Year 1, and the last payment will be received at the end of Year 20. You will invest each payment in an account that pays 10 percent. What will be the value in your account at the end of Year 30?
2. You want to buy a Nissan 350Z on your 27th birthday. You have priced these cars and found that they currently sell for $30,000. You believe that the price will increase by 5 percent per year until you are ready to buy. You can presently invest to earn 14 percent. If you just turned 20 years old, how much must you invest at the end of each of the next 7 years to be able to purchase the Nissan in 7 years?
3. You are given the following cash flow information. The appropriate discount rate is 12 percent for Years 1–5 and 10 percent for Years 6–10. Payments are received at the end of the year.
What should you be willing to pay right now to receive the income stream above?
4. Find the present value of an income stream which has a negative flow of $100 per year for 3 years, a positive flow of $200 in the 4th year, and a positive flow of $300 per year in Years 5 through 8. The appropriate discount rate is 4 percent for each of the first 3 years and 5 percent for each of the later years. Thus, a cash flow accruing in Year 8 should be discounted at 5 percent for some years and 4 percent in other years. All payments occur at year-end.
Can anybody help me pls!
I just want to check if my answers are right, except for #1 which I don't have.
1. Assume you are to receive a 20-year annuity with annual payments of $50. The first payment will be received at the end of Year 1, and the last payment will be received at the end of Year 20. You will invest each payment in an account that pays 10 percent. What will be the value in your account at the end of Year 30?
2. You want to buy a Nissan 350Z on your 27th birthday. You have priced these cars and found that they currently sell for $30,000. You believe that the price will increase by 5 percent per year until you are ready to buy. You can presently invest to earn 14 percent. If you just turned 20 years old, how much must you invest at the end of each of the next 7 years to be able to purchase the Nissan in 7 years?
3. You are given the following cash flow information. The appropriate discount rate is 12 percent for Years 1–5 and 10 percent for Years 6–10. Payments are received at the end of the year.
| Year | Amount |
| 1–5 | $20,000 |
| 6–10 | $25,000 |
What should you be willing to pay right now to receive the income stream above?
4. Find the present value of an income stream which has a negative flow of $100 per year for 3 years, a positive flow of $200 in the 4th year, and a positive flow of $300 per year in Years 5 through 8. The appropriate discount rate is 4 percent for each of the first 3 years and 5 percent for each of the later years. Thus, a cash flow accruing in Year 8 should be discounted at 5 percent for some years and 4 percent in other years. All payments occur at year-end.
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