1. Suggest you find an investment that will pay you $1.25 at the end of every year forever. You can earn a return of 6.3% on investments with similar risk. How much would you pay for this investment today?

2. Steve your cousin offers you a choice between two sets of cash flows: 1. $600 dollars at the end of the 1st year; $800 at the end of the second year, and $1000 at the end of the third year. OR 2. $800 at the end of the first, second, and third year. Your or your cousin can both earn 6% on your investment. Which would you prefer?

3. You have $20,000 to invest today. You find an investment where you will earn 5% for the first ten years and 8% for the next ten years after that. How much will you have at the end of 20 years?

4. What is the effective annual rate if a bank charges you 5.19 percent compounded quarterly?