1. Maddy was scheduled to make payments of $5,000 in 1 years from now, and $7,500 in 4 years from now. She is proposing an alternative arrangement that would involve a payment in 6 months from now, followed by a payment of $11,500 in 3 years from now. How much would the payment in 6 months from now need to be in order for the two streams to be economically equivalent? Assume that money can earn 3% compounded semi-annually. Hint: A timeline would be helpful.

I/Y

P/Y

N

PV

PMT

FV

2..Your local bank is offering a one year GIC that pays 7.5% compounded quarterly. What would be the minimum nominal rate you would accept for a GIC of the same maturity that is compounded semi-annually?

NOM

C/Y

EFF

Answer with a written statement: