1. a. 2. Present and future value of an annuity due Calculate the present value of the following cash flow stream at 6% +300 +300 +300 + t=1 t=2 1-3 + 1-0 + b. PV= What is the Future value of this stream after 3 years? FV = PV(1 r)' The trickiest part of a question is finding out the value of the number of years. You either hve to use trial and error or use logarithms. How long will it take for $400 to become $ 1000 at the rate of 4%? (1)n 3. Investments have grown at a compounded annual growth rate of 5%. If you invested $ 100 in 1990, how much would you have at the end of 2012? 4. A zero coupon bond (just a fancy term, for now please ignore) pays $ 1000 at the end of 10 years from today. So the future value at the end of ten years of this bond is $ The bond is currently selling for $422.41. The present value of this bond is $ What interest rate is it trading at? That is find out "r". FV = PV(1+r)