1.

Assume that you are going to receive $710,000 in 10 years. The current market rate of interest is 4.5%, compounded annually.

a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1

b. Why is the present value less than the $710,000 to be received in the future? The present value is less due to over the 10 years.

2 .On January 1 you win $3,280,000 in the state lottery. The $3,280,000 prize will be paid in equal installments of $410,000 over 8 years. The payments will be made on December 31 of each year, beginning on December 31. If the current interest rate is 7%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar. $fill in the blank 1

3.

Use the following tables to calculate the present value of a $164,000 @ 5%, 5-year bond that pays $8,200 interest annually, if the market rate of interest is 10%. Round to the nearest dollar.

Present Value of $1						Present Value of Annuity of $1
Periods	5 %	6 %	7 %	10 %		Periods	5 %	6 %	7 %	10 %
1	.95238	.94340	.93458	.90909		1	.95238	.94340	.93458	.90909
2	.90703	.89000	.87344	.82645		2	1.85941	1.83339	1.80802	1.73554
3	.86384	.83962	.81630	.75131		3	2.72325	2.67301	2.62432	2.48685
4	.82270	.79209	.76290	.68301		4	3.54595	3.46511	3.38721	3.16987
5	.78353	.74726	.71299	.62092		5	4.32948	4.21236	4.10020	3.79079
6	.74622	.70496	.66634	.56447		6	5.07569	4.91732	4.76654	4.35526
7	.71068	.66506	.62275	.51316		7	5.78637	5.58238	5.38929	4.86842
8	.67684	.62741	.58201	.46651		8	6.46321	6.20979	5.97130	5.33493
9	.64461	.59190	.54393	.42410		9	7.10782	6.80169	6.51523	5.75902
10	.61391	.55839	.50835	.38554		10	7.72173	7.36009	7.02358	6.14457

with explanation please