An investment opportunity has the following characteristics: payments of $10,000 will be made to you and invested into a fund at the beginning of each year, for the next 20 years. These payments will earn a 7% effective annual rate, and the interest payments (paid at the end of each year) will immediately be reinvested into a second account earning a 4% effective annual rate. Find the purchase price of this investment opportunity, given that it has an annual yield of 6% over the 20- year life of the investment.

Development costs of a new product are estimated to be $100,000 per year for five years.  Annual profits from the sale of the product, estimated to be $75,000, will begin in the fourth year and each year they will increase by ($10,000 + $10,000*4) through year 15.  Compute the present value using an interest rate of 10%.  Draw a cashflow diagram.

You are going to invest $1,500 today in a fund today. After 10 years, you want to have exactly $2,500 in the fund. If the interest rate is compounded annually, what interest rate is needed to achieve this?

You are considering a 10 year investment plan in which your target is $150,000. There are two options available for you:   Option 1: Putting exactly an equal amount of money into an investment fund at the end of each year for 10 years with the rate of return of 8%, annually compounding.   Option 2: Putting your initial investment of $50,000 in an asset that will pay you 9% rate of return, compounding quarterly for the first 6 years. The rate of return, compounding annually for the last 4 years (the period from year 7 to the end of year 10) has not been defined yet.   Required: Compute the effective annual interest rate (EAR) in the first 6 years in Option 2?  Compute the annually compounding rate of return you should target for your asset in the following 4 years to get $150, 000 at the end of year ten in Option 2?