Question
9. a) What must be the interest rate in order for an investment of $1,000 to produce proceeds of $2,000 in 20 years? b) If
9. a) What must be the interest rate in order for an investment of $1,000 to produce proceeds of $2,000 in 20 years?
b) If a cash flow of $2,000 in 20 years has a price today of $1,000, what must be the discount rate (i.e., the implied rate)?
10. An asset promises to pay $50,000 in five years and $100,000 in ten years. What is its price if the 5-year rate of discount is 10% and the 10-year rate of discount is 5%?
11. An asset promises to pay $1,000 in each of the next two years.
a) What is its present value assuming the one-year rate of discount is 1.5% and the two-year is 2.2%?
b) What is its present value assuming both discount rates are 1.85%?
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