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After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $420,000.
Required:
If the relevant interest rate is 12 percent for the first six years and 7 percent for all subsequent years, what is the value of the policy at the child’s 65th birthday?
7) Rooster Co. has identified an investment project with the following cash flows.
Year Cash Flow
1 $970
2 760
3 1,430
4 1,790
Requirement 1:
If the discount rate is 9 percent, what is the present value of these cash flows? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Present value$
Requirement 2:
What is the present value at 17 percent?
8) What is the present value of $2,625 per year, at a discount rate of 9 percent, if the first payment is received 7 years from now and the last payment is received 21 years from now? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Value today
9) Prepare an amortization schedule for a three-year loan of $108,000. The interest rate is 9 percent per year, and the loan agreement calls for a principal reduction of $36,000 every year. How much total interest is paid over the life of the loan? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Leave no cells blank. You must enter ‘0’ for the answer to grade correctly.)
Year 1 2 3
Beginning
Balance
Total
Payment
Interest
Payment
Principal
Payment
Ending
Balance
Total interest$
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