1. The present value of $500,000 received at the end of five years discounted at 10% is

a. $805,255.

b. $310,461.

c. $306,957.

d. none of these

2. Marco needs $175,000 six years from today. How much should Marco deposit today into an investment account that provides a 12% annual return in order to accomplish his goals?

a. $89,523

b. $88,660

c. $85,487

d. $62,500

3.Margaret will receive an insurance settlement of $3,000,000 in five years. Randall is willing to give her a lump sum today in return for the payment in five years. If current interest rates are 12% per year, how much will Margaret receive today?

a. $960,637

b. $1,702,281

c. $1,116,790

d. $1,800,000

4.All of the following are conditions for an ordinary annuity except

a. periodic cash flows must be equal in amount

b. the time periods between the cash flows are the same length

c. the interest rate is constant for each time period

d. interest is compounded in the middle of each time period

5.All of the following are conditions for an ordinary annuity due except

a. periodic cash flows must be equal in amount.

b. the time periods between the cash flows are the same length.

c. the future value is equal to the present value.

d. interest is compounded at the end of each time period