1. Which would you prefer: $30,000 today, $60,000 ten years from now, or $120,000 thirty years from now? Answer this question in the face of each of three different scenarios: annual interest rates of 2%, 4%, and 6%. (this means that there are three different problems to solve) (5 points) 2. You have two opportunities to invest $25,000 for 12 years. The first provides a yield of 6.50% annually, compounded weekly. The second provides a yield of 6.75% annually, compounded semi-annually. Which investment would be preferred and why? Be sure to document your conclusion with evidence. (3 points) 3. You can purchase a bond that has 12 years to maturity. In exchange for your purchase today, it will pay you $4,780 at the end of each of the next twelve years with the first payment coming one year from now. It can be purchased for $35,000. Should you buy the bond given that you can earn 8% annually on an alternative investment of equivalent risk? (4 points) 4. Suppose you find oil in your backyard and the oil company forecasts the following royalty payments at the end of each of the next six years. Year 1 = $ 39,000; Year 2 = $55,000; Year 3 = $63,000, Year 4 = $75,000; Year 5 = $81,000; Year 6 = $45,000. A. If you were to decide to take each of the royalty checks identified above and deposit them in a savings account that earned 1.8% annually but paid out interest each month, what balance would you have in your account at the end of the six years? (3 points) B. What is the present value of your discovery if your funds could receive a 6% return in an alternative investment? (3 points) C. In the face of the information provided above, what is the least that you would be willing to accept if you were to sell your oil rights today? Justify your answer. (2 points)

1. Which would you prefer: $30,000 today, $60,000 ten years from now, or $120,000 thirty years from now? Answer this question in the face of each of three different scenarios: annual interest rates of 2%,4%, and 6%. (this means that there are three different problems to solve) (5 points) 2. You have two opportunities to invest $25,000 for 12 years. The first provides a yield of 6.50% annually, compounded weekly. The second provides a yield of 6.75% annually, compounded semi-annually. Which investment would be preferred and why? Be sure to document your conclusion with evidence. ( 3 points) 3. You can purchase a bond that has 12 years to maturity. In exchange for your purchase today, it will pay you $4,780 at the end of each of the next twelve years with the first payment coming one year from now. It can be purchased for $35,000. Should you buy the bond given that you can earn 8% annually on an alternative investment of equivalent risk? (4 points) 4. Suppose you find oil in your backyard and the oil company forecasts the following royalty payments at the end of each of the next six years. Year 1=$39,000; Year 2=$55,000; Year 3=$63,000, Year 4=$75,000; Year 5=$81,000; Year 6=$45,000. A. If you were to decide to take each of the royalty checks identified above and deposit them in a savings account that earned 1.8% annually but paid out interest each month, what balance would you have in your account at the end of the six years? (3 points) B. What is the present value of your discovery if your funds could receive a 6% return in an alternative investment? (3 points) C. In the face of the information provided above, what is the least that you would be willing to accept if you were to sell your oil rights today? Justify your answer. (2 points)