1. Answer the following questions assuming the interest rate is 10 percent.

a. What is the present value of $1,000 to be received in 4 years?

b. What is the present value of $1,000 in 8 years? Why does the present value fall as the number of years increases?

c. How much would you pay for the right to receive $5,000 at the end of year 1, $4,000 at the end of year 2, and $8,000 at the end of year 10?

d. How much would you pay for a 10-year bond with a par value of $1,000 and a 7 percent coupon rate? Assume interest is paid annually.

e. How much would you pay for a share of preferred stock paying a $5-per-share annual dividend forever?

f. What will be the value in 7 years of $12,000 invested today? g. How long will it take for a $2,000 investment to double in value? h. What will be the value in 20 years of $500 invested at the end of each year for the next 20 years? i. A couple wishes to save $250,000 over the next 18 years for their child's college education. What uniform annual amount must they deposit at the end of each year to accomplish their objective? j. What return do you earn if you pay $22,470 for a stream of $5,000 payments lasting ten years? What does it mean if you pay less than $22,470 for the stream? More than $22,470? k. How long must a stream of $600 payments last to justify a purchase price of $ 6,000.00? Suppose the stream lasted only five years. How large would the salvage value (liquidating payment) need to be to justify the investment of $6,000.00?

1. An investment of $1,300 today returns $61,000 in 50 years. What is the internal rate of return on this investment? m. A company is planning to set aside money to repay $150 million in bonds that will be coming due in 8 years. How much money would the company need to set aside at the end of each year for the next 8 years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year?