1) A cash flow involves payments of $1000 after year 1, 2, and 3. Calculate the present value of this cash flow, assuming the following simple rates of interest:

a) .05

b) .08

c) .10

2) The State Lottery announces that the Grand Prize Winner has won $20 million, to be paid $1million per year for the next 20 years. Calculate the present value of this cash flow for the following interest rates:

a) .04

b) .08

3) A bond pays $1500 at maturity, which is after 5 years. Calculate the Yield to Maturity assuming the following purchase prices for the bond:

a) $1000

b) $1300

c) $1600

4) Calculate the YTM on a $1000 face-value discount bond, selling for $800, maturing after

a) 1 year

b) 5 years

c) 10 years