1.

A rational person would prefer which of the following cash flows.

a. $5,000 per year for 10 years with the first payment made one year from today

b. $5,000 per year for 10 years with the first payment made today

c. $50,000 paid today

d. $25,000 paid today and $25,000 paid next year

e. $49,000 paid today

#2

What is the value today of a money machine that will pay $1,540.00 per year for 17.00 years? Assume the first payment is made one year from today and the interest rate is 9.00%.

#3

What is the value today of a money machine that will pay $4,670.00 per year for 26.00 years? Assume the first payment is made 4.00 years from today and the interest rate is 14.00%.

#4

What is the value today of a money machine that will pay $2,116.00 every six months for 13.00 years? Assume the first payment is made six months from today and the interest rate is 15.00%.

#5

What is the value today of a money machine that will pay $2,863.00 every six months for 27.00 years? Assume the first payment is made 3.00 years from today and the interest rate is 6.00%.