FIN 320

Homework # 2

What is the present value of the following annuities:$400 per year for 10 years at 10%$500 per year for 5 years at 5%Rework a. and b. assuming they are annuities due.Suppose you are 25 years old. You hope to retire in 35 years (at age 60)

and want to have enough money for to live a comfortable retirement for 30 more

years (to age 90). You think you will

need $50,000 per year in retirement. You

also think you can earn a 7% return on your investments.How much money will you need to have saved by the start

of your retirement (at age 60)?How much money will you need to save each year between

now and then to reach that goal?

Assume in this question that all cashflows take place at

the end of the year. (This means the

first deposit into your savings account will take place at age 26 and the first

withdrawal will take place at age 61.)

What is the Effective Annual Rate (EAR) of the

following quoted rates?9% compounded monthly17.9% compounded dailyCreate the first three lines of an amortization table

for a 3-year, $10,000 loan if the interest rate on the loan is 9%. (Payments on the loan are made monthly.)

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