1. Calculate the discount factor for a 3 year, risk-free investment with annual interest rates of 5%. Why is this number lower than 1?

2. Conversely, why should you expect the compounding factor to be greater than 1?

3. If this same investment grants $750 after 3 years, what is the Present Value of the investment?

4. What would the Future Value of this same investment be after 3 years if you invested $500 today?