1. Assume interest rate of 10%.Supposethat you receive $10,000 at the end of each year for3 years. Suppose that this cash flow starts at the end of the fifth year.Compute the present value. Hint: it might help to visualize this problem by drawing a time-line.
2. Assume interest rate of 5%.Supposethat you receive $1,000 at the end of each year for5 years. Suppose that the first payment of $1,000 starts at the end of the fifth year.Compute the present value. Hint: it might help to visualize this problem by drawing a time-line.
3. At what rate are you indifferent between receiving $100 per year forever and $150,000 today.