Part I   Answer the following questions     1

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Part I

 

Answer the following questions

 

 

1.     What is the difference between an annuity and a perpetuity? (10 points)

2.     What is the difference between an ordinary annuity and an annuity due? (10 points)

 

Part II

Calculate the value that is requested for each problem. The calculations and formulas of each exercise must be presented with the answer.

1.     José Luis has the opportunity to make an investment that requires a payment of $750 per year for the next twelve years. If the investment is made at an interest rate of 8%, what is the value of that investment today?

2.     is the present value of an investment that guarantees a payment of $22,500 per year for the next five years if the annual compound interest rate is 15%?

3.     Roberto Homar is planning to invest $25,000 annually for the next seven years, an investment that will pay you an annual compound interest of 11.4%. How much money will Roberto have at the end of seven years?

4.     Thomas is 25 years old and planning to invest $3,000 annually in an IRA that pays 9.75% annual compound interest until she retires at age 65. How much money will Cecilia have for retirement?

5.     How much would you pay today for a perpetuity of $1,000 a year if the prevailing interest rate is 5.25%?

6.     How much would you buy a preferred stock that pays $5 of annual dividend if you require a yield of 12% annual interest?

7.     Determine how much you would pay in total, interest, and principal, at the end of your 30-year mortgage at 3.99% monthly compound interest if the monthly payment is $675.00.

8.     How much would you have to pay monthly for the car you want to buy if the cost of the car is $30,000 and they fund it at 5.75% of the compound interest for six years without having to pay soon?

9.     How much money will you have paid at the end of ten years if you pay $10,000 per equipment lease at the beginning of each year and the annual compound interest rate is 4.75%?

10. From the information of the previous exercise, calculate how much you'll pay at the end of the ten years, if you pay $10,000 annually at the end of each year instead of the beginning of the year. Which option suits you best?