1) You are offered an annuity that pays $2,000 annually at the end of each of the next 10 years. If the discount rate is 4%, what should be the price (value) of the annuity today?
2) If the annuity described in problem 1 were to offer payments at the beginning of each year, what would the price (value) have been?
3) At age 66 you begin receiving monthly (m=12) social security payments of $2,100 at the end of each month. If you expect to live until age 86 (20 more years), and the discount rate is 3.2%, what is the present value of your social security benefit?
4) You have a credit card balance of $1,800. You can only afford to make the minimum payment of $30 - which is due at the end of each month. The the APR on the credit card is 18%, how many years will it take you to pay off the card balance?
5) You buy a house and finance it with a $250,000 30-year mortgage loan that requires equal payments at the end of each month. Your APR is set at 5.4%. What would be the amount of each of your monthly payments?
6) You win the lottery! You have a choice of either receiving $275,000 today, or $20,000 at the end of each of the next 20 years. If you took the lump sum payment, how much money would you be sacrificing assuming an APR discount rate of 2.8%?