Question

2) Annuity (Unit: Thousand):

a) Assume the football star Tom gets a new contract now. The contract will last for 14 years from now. At period 0, He gets the signing bonus 500. From 4th year, he will get cash salary 200 for every two year. At the final, he will end this contract and will get the severance pay of 700. Please compute the present value of this contract with annual interest of 10 percent.

b) Couple Tom and Lucy get their daughter now. They want their daughter to receive good high education in the future. In the case, they decide to save money from 1th year to 17th year. They want to save enough money to support his daughter education before their daughter goes to university. Their daughter will go to university at 18 years old and receive four-year undergraduate education. The education expense is estimated 50 every year. Please compute how much the couple should save for every year with annual interest rate of 5 percent.

Answer 1