Assume that a college parking sticker today costs $78. If the cost of parking is

Question

Assume that a college parking sticker today costs $78. If the cost of parking is increasing at the rate of 4% per year, how much will a college parking sticker cost in nine years? (Round your answer to 2 decimal places.) Assume that the average price of a new home is $122,000. If new homes are increasing at a rate of 9% per year, how much will a new home cost in nine years? (Round your answer to 2 decimal places.) An investment will pay you $9,500 in 10 years, and it will also pay you $290 at the end of each of the next 10 years (years 1 thru 10). If the annual interest rate is 6%, how much would you be willing to pay today for this type of investment? (Round your intermediate calculations and final answer to the nearest whole dollar.) A college student is reported in the newspaper as having won $10,000,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $10.0 million now Instead she will receive $500,000 at the end of the year for each of the next 20 years. If the annual interest rate is 5%, what is the present value (today's amount') that she won? (ignore taxes). (Round your answer to nearest whole dollar.)

Explanation / Answer

d. The cost of the sticker in nine years = $78* FVIF(4%,9 years)=$78* (1+r)n

=$78*(1+0.04)9

=$78*1.4233

=$111.02

e. Cost of home in nine years = $122,000*(1+0.09)9

=$122,000*2.1719

=$264,970.98

f. You should pay $7423.57 for such type of investment.

Present value of investment = $9500* PVIF(6%, 10) +290*PVIFA(6%, 10)

=$9500*0.5584+$290*7.3061

=$5304.8+$2118.77

=$7423.57

g. Present value of lottery is $6,231,100.

PV= $500,000* PVIFA(5%,20yrs)

=$500,000*12.4622

=$6,231,100

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