1. You are considering purchasing an asset that will pay you nothing at time 1 and $4,000, $5,000, and $6,000 for the following three years (years 2 to 4). How much will you be willing to pay for the asset today given an interest rate of 4.65 percent? Your broker is willing to sell you the asset for $13,500. Is this a good deal?

A. $13,017.68, no

B. $13,017.68, yes

C. $13,500, indifferent

D. $13,623, no

E. $13,623,yes

2. I just won the Michigan State Lottery which is going to provide me with a perpetual annual payment of $11,444 with the first payment a year from now. However, I would like to receive a lump sum today. What is the present value of this cash stream if the interest rate is 7 percent? Mr. N. Maduro is willing to give me $165,000 if I sell him the winning lottery ticket. Should I accept Mr. N. Maduro's offer and why?

$1,634.86, yes because $165,000 is more

$16,348.57, yes because $165,000 is more

$16,348.57, no because $165,000 is more

$163,485.71, no because $165,000 is more

$163,485.71, yes because $165,000 is more