(1) In your own words describe the relationship between the Present Value Equation and The Future Value equation and explain why is the present value of a future sum is always less than the sum future value.

(2a) How would an increase in the interest rate (i) affect the future value of a sum of money? (2b) How would an increase in the interest rate (i) affect the present value of a sum of money? Explain why this would happen.

(3) The basic annuity valuation equation can handle situations in which there is compounding more frequently than once a year. In a one paragraph (75-100 word) posting, describe the method you would use to convert the key variables of an 8% APR annuity with $1,000 annual payments at the end of each year for 4 years to semiannual compounding for use in the annuity formula. Specifically, (a) identify all the variables that require conversion, (b) show the method for each variables conversion to semiannual and (c) show your final annuity formula with converted variables after adjustment for semiannual compounding.

(NOTE you do not have to solve this problem just show your setup for conversion)

(4) The three basic conditions required for an annuity, and using the annuity formula, are: (1) the payment amount per period must be equal for all payments, and (2) The time periods must be consistent for all periods i.e. monthly, quarterly, annually etc., and the interest rate must be constant for all periods. How would you solve a cash flow stream where these annuity conditions do not apply?