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Financial Management
1. What is the future value of $500 a year for nine years
compounded annually at 11%? How much will the future value
of $900 for nine years compounded annually at 11% be?
2. How many years will it take for $500 to grow to $1,051.82 at
10% compounded annually?
3. What is the present value of a perpetual stream of cash flows
that pays $80,000 at the end of one year and grows at a rate of
7% indefinitely? The rate of interest used to discount the cash
flows is 9%. What is the present value of the growing
perpetuity?
4. To pay for your education you have taken out $28,000 in
student loans. If you make monthly payments over 13 years at
6% compounded monthly, how much are your monthly student
loan payments?
5.
How much do you have to deposit today so that beginning 11
years from now, you can withdraw $9,000 a year for the next
eight years (periods 11 through 18) plus an additional amount of
$18,000 in the last year (period 18)? Assume an interest rate of
8%. What is the amount of money you would need to deposit
today?

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  • 1. Financial Management 1. What is the future value of $500 a year for nine years compounded annually at 11%? How much will the future value of $900 for nine years compounded annually at 11% be? 2. How many years will it take for $500 to grow to $1,051.82 at 10% compounded annually? 3. What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity? 4. To pay for your education you have taken out $28,000 in student loans. If you make monthly payments over 13 years at 6% compounded monthly, how much are your monthly student loan payments? 5. How much do you have to deposit today so that beginning 11 years from now, you can withdraw $9,000 a year for the next eight years (periods 11 through 18) plus an additional amount of $18,000 in the last year (period 18)? Assume an interest rate of 8%. What is the amount of money you would need to deposit today?