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1) You are negotiating a book deal for your newest novel in which an economist single-handedly saves the world. The publisher offers to pay you
1) You are negotiating a book deal for your newest novel in which an economist single-handedly saves the world. The publisher offers to pay you an advance of $1 million today plus $500,000 at the end of each of the next three years. What is the present value of these payments, given the annual rate of discount is 5 percent? Show your work. 2) You borrow $30,000 to pay tuition and fees in the form a student loan, to be paid over 10 years. The annual interest rate (assume fixed) is 12 percent. What monthly payment would be required to pay off the loan? Show your work. . . 3) You are considering investing in 2 possible assets. Asset A pays 5% annual interest rate with quarterly compounding (every 3 months). Asset B pays 4.95% annual interest rate with monthly compounding. If your objective is to keep your money in any of these 2 assets for (assume exactly) 2 years, which asset is the best choice and why? Justify your answer numerically. . 4) You are considering investing in some project. It has an initial cost of $2m in year zero and it generates an income of $3.38m in year 2. Compute the internal rate of return of this project. Show your work
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