1. Consider the following four alternatives: (1) $132 received in two years. (2) $160 received in five years. (3) $200 received in eight years. (4) $220 received in ten years.

(a) What would be the ranking of the four alternatives from most valuable to least valuable if the interest rate is 7% per year?

(b) What would be the ranking of the four alternatives from most valuable to least valuable if the interest rate is 6% per year?

(c) Why did the ranking change with interest rate?