FINC 300 1st Edition Lecture 6 Outline of Last Lecture I. AnnuityA. Stream of equal cash flowsII. PerpetuityA. Equal intervals that last foreverB. Present Value of PerpetuityIII. Growing Perpetuitya. Growth at a constant rateb. Present ValueOutline of Current Lecture I. Chapter 4 Continued: Practice ProblemsCurrent LectureI. You are interested in purchasing a new automobile that costs $33,000. The dealership offers you a special financing rate of (0.75% per month) for 60 months. Assuming that you do not make a down payment on the auto and you take the dealer's financing deal, what would your monthly car payments be? Computing the Payment, You want the Future Value (FV) to equal 0 (zero) so you do not owe any more money by the end the payment period.N= 60, I= 0.75, PV= $33,000, FV=0; PMT= $685.03$685.03 x 60 = $41,101.54II. A businessman wants to buy a truck. The dealer offers to sell the truck for either $120,000 now, or six yearly payments of $25,000. Which of the following is closest to theinterest rate being offered by the dealer? Computing the Interest rate being offered. N= 6, PV= $120,000, PMT= -25,000, FV=0Interest = 6.77%: These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.III. You win $30 million in the lottery and have two options: You can receive $15 million nowor $1 million at the end of every year for 30 years. Your bank offers an annual interest rate of 7% on its savings accounts. Which is the better option? Option 1: Accept 15,000,000 at Time 0, so PV= 15,000,000Option 2: Accept 1,000,000 every year for 30 yrs; find the PV of 1 Mil at 30 years.Option 2: N=30, I=7, PMT= 1,000,000, FV= 0; PV = 12,409.18Option 1 is the better option because 15 mil is greater than 12 milIV. You plan to invest $100,000 now in an account paying a 6% annual interest rate to save for retirement. How much will you have when you retire in 40 years? Compute the FV of 100,000 at 40 years.I= 6, PV= 0, N= 40, PMT= 100,000FV= $1,028,571.79V. You plan to invest $10,000 at the end of every year for the next 40 years in an account paying a 6% annual interest rate. How much will you have when you retire in 40 years? Compute the FV of $10,000 after 40 yearsN=40, PMT= 10,000, I=6, PV=0FV=