Q1

Your grandfather has offered you a choice of one of the three

alternatives
Option 1 Option 2 Option 3
$5000 today $1000 a year for $12000 at the end of
eight years eighth year.
a. Assume you can earn 11% annually which option you will
choose.
b. Assume you can earn 12% annually which option you will
choose.
Q2
You need $30,750 at the end of eight year, the available option that
your bank is offering you is 12% compounded annually. How
much you need to invest today so as to receive your desire
amount at the end of tenure.

Q3
On Jan 1st 1995, Mr. Samson bought 100 shares at the rate of $13
per share, on Dec 31st he sold the stock for $20.5 per share.
What annual rate of return that he received?

Q4
Mr. Johnson has just given the insurance company $20,000. In
return the company has promised to give him $1,800 for 20 years
each year. At what rate of return the company must invest the
amount so as to attain the desired return.

Q5
Ms. Mills has retired from her company and received her gratuity
fund amounted to $300,000. What amount she will receive for the
next 18 years if she invested the fund at the rate 8% compounded
annually.
Q6
If you borrow $9,725 and are required to repay the loan in five
equal installments of $2,500 each. What rate of interest you have
paid? Also mention amount of interest.

Q7

If you borrow $50,000 from a bank at the rate of 10% per annum
for eight years. What annual payments must be made to repay loan.
Develop an Amortization schedule to show all the payments done in
the eight year time period. Show
a. Beginning amount
b. Annual payment
c. Contribution of annual payment to the loan
d. Contribution of annual payment to the interest.

Q8 A local bank advertises the following deal “Pay us $ 100 a year

for 10 years and then we pay you $100 a year forever” Is it a
good deal if the interest rate available on other options is 8%.

Q9 A local bank will pay you $100 a year forever if you pay $2500
in the bank today. What interest rate bank is paying you?

Q10 A property will provide $10,000 a year forever. If its value is

$125,000. What must be the discount rate?

Q11 Mr Jim borrows $70,000 at 12% interest towards a purchase

of a new house. His mortgage is for 30 years. What will be his
annual payments? How much interest is paid over the tenure?

Q12 Retirement Planning

 If you believe to safe $500,000 by the time you retire. If you are
planning to retire in 40 years. If the interest rate is 6% how
much money you should deposit each month.

Q12 Retirement Planning

You believe you will spend $40,000 a year for 20 years after
the retirement. If you think you will retire in next 30 years.
How much money you need to invest each year if the interest
rate is 6% per annum.