1. Today you borrow $15,000 to pay for your expected college costs over the next four years, including a master’s degree

[answerhappygod]

1. Today you borrow $15,000 to pay for your expected college
costs over the next four years, including a master’s degree. Three
years from now, you determine that you need an additional $5,000 so
you borrow this additional amount. Starting four years from the
original loan (one year from the second loan), you begin to repay
your combined debt by making annual payments of $3,500. You will
make these payments for 10 years. Draw a cash flow diagram of this
situation from your perspective.
2. Consider the following investment cash flows with the
interest rate of 7% compounded annually.
End of Year
Net Cash Flow
End of Year
Net Cash Flow
0
$0
4
$300
1
$500
5
− $200
2
− $100
6
− $100
3
$700
7
$800
a. Find the present worth of the cash flows using the actual
cash flows.
b. Find the future worth of this cash flow series using the
actual cash flows.
c. Find the future worth using the present worth.
d. Find the worth of the series at EOY 4 using the individual
cash flows.
e. Find the present worth using the worth at EOY 4.
3. Please calculate the value of a 3%, 10-year bond with a par
(and redemption) value of $10,000 that pays dividends annually, if
the investor would like to earn a 5% return.