A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $250,000 a year for the next 20 years. The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer for the defendant's insurance company argues for a discount rate of 9 percent. What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answers to 2 decimal places.) PV at 4% rate PV at 9% rate Difference $ Present Value 0.00

Your employer asks you to consult on the better approach to a decision.  What should the corporation pay for an asset that will return them $150,000 at the end of year 1, then zero in year 2, then $400,000 in years 3 & 4, then zero in year 5, then $200,000 in years 6-10, assuming their discount rate is 3% (ignoring taxes) ?

Your friend needs money today and can pay you $400 in one year, $800 in 3 years, $200 in 5 years and $1,000 every year starting at the beginning of year 7 and ending at the beginning of year 10. How much would you be willing to lend him today if you both agree that 9% interest is fair.

Beverly and Kyle currently insure their cars with separate companies, paying $500 and $510 a year. If they insured both cars with the same company, they would save 15 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 6 percent? Use Exhibit 1-B. (Do not round intermediate calculations. Round time value factor to 3 decimal places and final answer to 2 decimal places.) Future value of annual savings

Hank purchased a car for $20,500 two years ago using a 4-year loan with an interest rate of 6.0 percent. He has decided that he would sell the car now if he could get a price that would pay off the balance of his loan.   What’s the minimum price Hank would need to receive for his car? Calculate his monthly payments, then use those payments and the remaining time left to compute the present value (called balance) of the remaining loan. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Minimum Price = $_____.__

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7. George, a financial planner, has determined that Dennis, his client, needs $2 million at age 66 to retire by using an annuity model based on a retirement income of $150,337.75 per year for 24 years to age 90. If the earnings rate was 10% and the inflation rate was 3%, what additional amount would be needed at age 66 to provide a capital preservation model solution?

Joe wants to own a home in the future. He asks you describe an advantages and disadvantage of a FRM versus an ARM.       He then asks you to describe the advantages and disadvantages of a 15-year loan versus a 30-year loan.       He also wants to know how the portion of the home payment that comprises interest changes over the years assuming he takes out an FRM.             Is there anything he can do to reduce the total amount he’ll pay for the home?      What else would be added to his monthly mortgage payment?        What are three benefits of home ownership? What are three benefits of renting?