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1.

If you want a $1,000,000 for retirement in 30 years, how much would you have to save by the end of
each year if you could make 12% per year? How much would you have to set aside each year if you
could put money away starting now?
2. If you put $5000 in the stock market, how many years would it take you to triple your money if the
market is making 12% a year?
3. If you put $10 away at the end of each month for the next 40 years at a 12% simple annual interest rate,
how much money would you end up with? What if you started at the beginning of each month?
4. If you borrow $150,000 for a house at 8% simple annual interest rate for 15 years, what is your monthly
payment?
5. How long would it take to accumulate $50,000 if you started putting $5 in the bank every day starting at
the end of today at simple annual interest rate of 7.3%?
6. How long would it take to accumulate $50,000 if you started putting $5 in the bank every month
starting now at a simple annual interest rate of 7.3%? What if you started at the end of each month?
7. You are valuing an investment that will pay you $26,000 per year for the first 9 years, $34,000 per year
for the next 11 years, and $47,000 per year the following 14 years (all payments are at the end of each
year). Another similar risk investment alternative is an account with a quoted annual interest rate of
9.00% with monthly compounding of interest. What is the value in today's dollars of the set of cash
flows you have been offered?
8. You have just won the Georgia Lottery with a jackpot of $40,000,000. Your winnings will be paid to
you in 26 equal annual installments with the first payment made immediately. If you feel the
appropriate annual discount rate is 8%, what is the present value of the stream of payments you will
receive?
9. You are planning for retirement 34 years from now. You plan to invest $4,200 per year for the first 7
years, $6,900 per year for the next 11 years, and $14,500 per year for the following 16 years (assume all
cash flows occur at the end of each year). If you believe you will earn an effective annual rate of return
of 9.7%, what will your retirement investment be worth 34 years from now?
10. You plan to retire 33 years from now. You expect that you will live 27 years after retiring. You want
to have enough money upon reaching retirement age to withdraw $180,000 from the account at the
beginning of each year you expect to live, and yet still have $2,500,000 left in the account at the time of
your expected death (60 years from now). You plan to accumulate the retirement fund by making equal
annual deposits at the end of each year for the next 33 years. You expect that you will be able to earn
12% per year on your deposits. However, you only expect to earn 6% per year on your investment after
you retire since you will choose to place the money in less risky investments. What equal annual
deposits must you make each year to reach your retirement goal?

Annuity FV = C { [ (1 + i)N 1] / i}
Annuity PV = C { [ 1 1 / (1 + i)N ] / i}

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1. You are planning to retire in twenty years. You'll live ten years after retirement. You want to be able to draw out of your
savings at the rate of $10,000 per year. How much would you have to pay in equal annual deposits until retirement to meet
your objectives? Assume interest remains at 9%?

2. You are going to pay $100 into an account at the beginning of each of the next 40 years. At the beginning of the 41st year you
buy a 30 year annuity whose first payment comes at the end of the 41st year (the account pays 12%). How much will you
receive at the end of the 41st year (i.e. the first annuity payment)

3. What is the present value of an annuity of $27 received at the beginning of each year for the next six years? The first payment
will be received today, and the discount rate is 10%

4. You can deposit $4000 per year into an account that pays 12% interest. If you deposit such amounts for 15 years and start
drawing money out of the account in equal annual installments, how much could you draw out each year for 20 years?

5. You are considering the purchase of two different insurance annuities. Annuity A will pay you $16,000 at the beginning of
each year for 8 years. Annuity B will pay you $12,000 at the end of each year for 12 years. Assuming your money is worth
7%, and each costs you $75,000 today, which would you prefer?

6. You are going to pay $800 into an account at the beginning of each of 20 years. The account will then be left to compound for
an additional 20 years. At the end of the 41st year you will begin receiving perpetuity from the account. If the account pays
14%, how much each year will you receive from the perpetuity

7. Charlie Stone wants to retire in 30 years, and he wants to have an annuity of $1000 a year for 20 years after retirement.
Charlie wants to receive the first annuity payment at the end of the 30th year. Using an interest rate of 10%, how much must
Charlie invest today in order to have his retirement annuity?

8. You plan to retire 20 years from now. You expect that you will live 15 years after retiring. You want to have enough money
upon reaching retirement age to withdraw $100,000 from the account at the beginning of each year you expect to live, and yet
still have one million dollars left in the account at the time of your expected death. You plan to accumulate the retirement fund
by making equal annual deposits at the end of each year for the next 20 years. You expect that you will be able to earn 10%
per year on your deposits. However, you only expect to earn 6% per year on your investment after you retire since you will
choose to place the money in less risky investments. How much will you deposit at the end of each year till retirement.

Annuity FV = C { [ (1 + i)N 1] / i}
Annuity PV = C { [ 1 1 / (1 + i)N ] / i}

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