1. Is the following statement true or false? The PV of a future payment is larger the greater the number of periods and the higher the discount (interest) rate. Provide a TVM example to illustrate the logic behind the correct response.

2. What is the present value of a 3-year ordinary annuity of $100 plus an additional $200 at the end of Year 3 if the annual interest rate is 10%? Show a time line of the cash flows, then show "calculator key strokes" that produce the correct PV.

3. Assume that you plan to buy a boat 5 years from now. You have no funds now, but you think you can save $5,000 per year. You plan to invest the funds in securities that you think will provide a 10% after-tax annual rate of return. If you make the first of the 5 deposits immediately, how much will you have available to spend on the boat at the end of the 5th year? Show a time line of the cash flows, then show "calculator key strokes" that produce the correct PV.