a) For a given time period the higher the interest rate, the higher the present value. True or False? Give example to justify your answer. (8 Marks)

b) In order to avoid estate taxes, your rich Uncle Tom will pay you $10,000 per year for 4 years, starting 1 year from now. What is the present value of your benefactors planned gifts? The interest rate is 7%. How much will you have 4 years from now if you invest each gift at 7%? Show your workings and the formulas. (12 Marks)