5. Perpetuities: What is the Present Value of $1,000 forever? (Interest rate =10%)

6. You are looking at an investment that will pay $1200 in 5 years if you invest $1000 today. What is the implied rate of interest?

7. Benjamin Franklin died on April 17, 1790. In his will, he gave 1,000 pounds sterling to Massachusetts and the city of Boston. He gave a like amount to Pennsylvania and the city of Philadelphia. Franklin originally specified that the money should be paid out 100 years after his death and used to train young people. Later, it was agreed that the money would be paid out 200 years after Franklins death in 1990. By that time, the Pennsylvania bequest had grown to about $2 million; the Massachusetts bequest had grown to $4.5 million. Assuming that 1,000 pounds sterling was equivalent to 1,000 dollars, what rate did the two states earn? (Note: the dollar didnt become the official U.S. currency until 1792.)