5 . Your brother has offered to give you either $ 5,000 today or $ 10,000 in 10 years . If the interest rate is 7 % per year , which option is preferable ?
6 . Consider the following alternatives . i . $ 100 received in 1 year ii . $ 200 received in 5 years iii . $ 300 received in 10 years a . Rank the alternatives from most valuable to least valuable if the interest rate is 10 % per year . b . What is your ranking if the interest rate is only 5 % per year ? c . What is your ranking if the interest rate is 20 % per year ?
8 . Your daughter is currently 8 years old . You anticipate that she will be going to college in 10 years . You would like to have $ 100,000 in a savings account to fund her education at that time . If the account promises to pay a fixed interest rate of 3 % per year , how much money do you need to put into the account today to ensure that you will have $ 100,000 in 10 years ?
9 . You are thinking of retiring . Your retirement plan will pay you either $ 250,000 immediately on retirement or $ 350,000 5 years after the date of your retirement . Which alternative should you choose if the interest rate is a . 0 % per year ; b . 8 % per year ; and c . 20 % per year ?
14 . You have been offered a unique investment opportunity . If you invest $ 10,000 today , you will receive $ 500 1 year from now , $ 1,500 2 years from now , and $ 10,000 10 years from now . a . What is the NPV of the opportunity if the interest rate is 6 % per year ? Should you take the opportunity ? b . What is the NPV of the opportunity if the interest rate is 2 % per year ? Should you take it now ?
36 . You are thinking of purchasing a house . The house costs $ 350,000 . You have $ 50,000 in cash that you can use as a down payment on the house , but you need to borrow the rest of the purchase price . The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7 % per year . What will your annual payment be if you sign up for this mortgage ?
37 . You would like to buy the house and take the mortgage described in Problem 36 . You can afford to pay only $ 23,500 per year . The bank agrees to allow you to pay this amount each year , yet still borrow $ 300,000 . At the end of the mortgage ( in 30 years ), you must make a balloon payment ; that is , you must repay the remaining balance on the mortgage . How much will this balloon payment be ?
38 . You have just made an offer on a new home and are seeking a mortgage . You need to borrow $ 600,000 . a . The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.5 % per month . What is the amount of your