1. Your Aunt Brooke has promised to leave you an annuity that will make its first payment of $70 in exactly one year. Thereafter, the payments will grow at an annual rate of 3.00%. The payments are expected to go on indefinitely. Your relevant interest rate is 9%. What is the value of the growing perpetuity?
2. An insurance company offers you an end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9 percent. What should you be willing to pay today for this annuity?
3. Professor Severus Snape deposited 500 Galleons into an account at Gringotts Bank, that pays 4% nominal annual interest, compounded quarterly. How much will he have in his account 10 years from now?
4. You borrow $149,000 to buy a house. The mortgage rate is 4.0% and the loan period is 15 years. Payments are made monthly. If you pay for the house according to the loan agreement, how much total interest will you pay?