1. Kelsie has taken out a 4-year loan on which she will pay only the interest that accrues each year on the $8,000 she borrowed. Her annual interest rate is 12%. What are Kelsie's annual payments on this interest-only loan?
a. $8,960
b. $8,000
c. $3,951
d. Zero
e. $960
2. Today, you are purchasing a 15-year, 8 percent annuity at a cost of $70,000. The annuity will pay annual payments. What is the amount of each payment if the present value factor for this annuity is 8.5595 ? (choose the closest answer)
a. $5,485.35
b. $6,329.57
c. $4,919.41
d. $8,178.07
e. $7,128.73
3. How much must be invested today in order to generate a 5-year annuity of $1,000 per year, with the first payment 1 year from today, at an interest rate of 12%? This question is which one of the following types of problems?
a. Future value of an annuity
b. Future value of a lump sum
c. Present value of a lump sum
d. Present value of an annuity
e. Present value of a perpetuity