1. Find the interest rates earned on each of the following. Round your answers to the nearest whole number.

1. You borrow $750 and promise to pay back $795 at the end of 1 year.

   %

2. You lend $750 and the borrower promises to pay you $795 at the end of 1 year.

   %

3. You borrow $56,000 and promise to pay back $87,247 at the end of 15 years.

   %

4. You borrow $14,000 and promise to make payments of $3,693.20 at the end of each year for 5 years.

   %

2. Find the following values. Compounding/discounting occurs annually. Do not round intermediate calculations. Round your answers to the nearest cent.

a. An initial $700 compounded for 10 years at 6%.

$

b. An initial $700 compounded for 10 years at 12%.

$

c. The present value of $700 due in 10 years at 6%.

$

d. The present value of $2,025 due in 10 years at 12% and 6%.

Present value at 12%: $

Present value at 6%: $

e. Define present value.

1. The present value is the value today of a sum of money to be received in the future and in general is less than the future value.
2. The present value is the value today of a sum of money to be received in the future and in general is greater than the future value.
3. The present value is the value today of a sum of money to be received in the future and in general is equal to the future value.
4. The present value is the value in the future of a sum of money to be received today and in general is less than the future value.
5. The present value is the value in the future of a sum of money to be received today and in general is greater than the future value.

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