1. Calculating Annuity Present Values. You want to borrow $89,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,850, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan?
2. You have $5,000 in your bank account earning a 5% rate of interest. You would like to withdraw an equal amount of money at the end of the next eight years. What is the cash flow amount that you can withdraw each year?