Question

.NEED ANSWER ASAP / ANSWER NEVER USED BEFORE, COMPLETELY NEW ANSWER PLEASE

a.)

Suppose you just won the state lottery, and you have a choice between receiving $3,550,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

Select the correct answer.

a. 1.91%

b. 2.71%

c. 4.31%

d. 3.51%

e. 5.11%

b.)

What's the present value of $6,000 discounted back 5 years if the appropriate interest rate is 4.5%, compounded semiannually?

Select the correct answer.

a. $3,828.47

b. $3,875.27

c. $3,851.87

d. $3,863.57

e. $3,840.17

c.)

American Express and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 12.00%, with interest paid monthly, what is the card's EFF%?

Select the correct answer.

a. 17.88%

b. 7.48%

c. 4.88%

d. 10.08%

e. 12.68%

d.)

Billy Thornton borrowed $160,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Billy have to pay in a 30-day month?

Select the correct answer.

a. $963.47

b. $968.27

c. $969.87

d. $965.07

e. $966.67

Answer 1

a]	$3550000 is the PV of the annuity of 250000 for 20 years.
	So, 3550000 = 250000*PVIFA(r,20), where r is the rate of return
	inbuilt in the scheme.
	Solving for r,
	PVIFA(r,20) = 3550000/250000 = 14.2000
	PVIFA of n = 20 and r = 3% = 14.8775
	for r = 4% = 13.5903
	The ROR = 3%+1%*(14.8775-14.20)/(14.8775-13.5903) =	3.53%
	Answer: [d]
	Difference in solution is due to approximation.
b]	PV = 6000/(1+0.045)^10 =	$       3,863.57
	Answer: [d]
c]	EFF = (1+0.12/12)^12-1 =	12.68%
	Answer: [e]
d]	Interest payable = 160000*7.25%*30/360 =	$           966.67
	Answer: [e]