Multiple choice

1. What is the present value of $5000 per year annuity at a discount rate of 10% for 6 years?  

a. $21,776.30 

b. $3,371.91 

c. $16,760.78 

d. None of the above 

2. After retirement, you expect to live for 25 years. You would like to have $75,000 income each year. How much should you have saved in the retirement to receive this income, if the interest is 9% per year (assume that the payments start on the day of retirement)?  

a. $736,693.47 

b. $802,995.88 

c. $2,043,750 

d. None of the above 

3. After retirement, you expect to live for 25 years. You would like to have $75,000 income each year. How much should you have saved in the retirement to receive this income, if the interest is 9% per year (assume that the payments start one years after the retirement)?  

a. $736,693.47 

b. $6,352,567.22 

c. $1,875,000 

d. None of the above 

4. For $10,000 you can purchase a 5-year annuity that will pay $2504.57 per year for five years. The payments are made at the end of each year. Calculate the effective annual interest rate implied by this arrangement: (approximately)  

a. 8% 

b. 9% 

c. 10% 

d. None of the above