ASSIGNMENT 1MGF 301Corporation FinanceSpring 2009DUE: Wednesday, February 4th at 6:00pm in Jacobs 365You may in a group of up to 4 on this Assignment. Please indicate clearly on all submitted Assignments who the members of the group are. Please note, all assignments submitted with more than 4 group members will automatically receive a 0 grade. No late assignments will be accepted. You may hand in the assignment in person in Jacobs 365 (put it under the door if no one is there) or submit it by email to the Digital Dropbox on UBLearns before the time it is due. All electronic submissions must be to the Digital Dropbox (go to Control Panel, Digital Dropbox and hit “Send file”). Note: If you use Digital Dropbox, please follow all the Digital Dropbox rules (see Syllabus).________________________________________________________________________________________________________Answer all of the following questions. For each answer, show your work to get full points (stating the answer alone is not sufficient).1. Your uncle died last year and left you money in his will. You are to receive $75,000 innine years (time 9) when you turn 30. (a) What is the present value of the inheritance if the appropriate discount rate is 7% and you compound annually?(b) What is the present value if you compute monthly?(c) If you invest the money when you receive it in time 9, how much will it grow to after 21 additional years (i.e., what is the future value in time 30) using annual compounding at 7%?2. You belong to an unusual pension plan because your retirement payments will continue forever (and will go to your descendants after you die). If you will receive $45,000 per year at the end of each year starting 25 years from now, what is the present value of your retirement plan if the discount rate is 4.5%?3. Your neighbor is buying a new recreational vehicle (RV). If he buys the RV for cash, the price is $55,000. Alternatively, he could buy the RV for monthly payments of $950 atthe end of each month for 72 months. At what discount rate, will the two options be equally attractive (using monthly compounding)?4. (a) You will be making equal deposits into a retirement account for 10 years (witheach payment at the end of the year). How much must you deposit each year if the account earns 5% compounded annually and you wish to have $200,000 after 35 years?(b) How does your answer change if you still make 10 annual payments but the account pays interest compounded monthly at an annual rate of
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