1. If the interest rate is 4%, what are the proceeds of a $5,000 investment after 10 years?

?a) assuming simple interest

?b) assuming compound interest

2. What if interest in #1 is compounded semi-annually? What if monthly?

3. How much do you need to deposit into a bank in order to receive proceeds of $200,000 in 5 years if the interest rate is 2.5%

What if interest is compounded quarterly?

4. What is the present value of $200,000 to be received in 5 years if the rate of discount is 2.5%?

5. What is the price today of a $200,000 cash flow in 5 years if the discount rate is 2.5%

6. What is the price today of $200,000 to be received in 6 years if the rate of discount is 2.5%? Compare to #5.

7. What is the price today of $200,000 to be received in 5 years if the rate of discount is 3%? Compare to #5.

8. Calculate the percentage price change between your answerin #5 and your answer in #7. This is known as the interest rate sensitivity.