1. Compute the present value of $80,000, to be received in ten years, if the interest rate is 12 percent.

2. Youve just accepted a contract to provide services for a client for seven years at a fee of $6,000 per year. Find the present value of this contract assuming that interest rates are 11 percent.

3. Ellen Saber is contemplating paying several years rent on her business office in advance. By paying in advance, she can avoid a rent increase that goes into effect the first of next year. Ellens rent payment is $4,800 per year. Calculate the sum that Ellen would have to pay now in order to prepay five years of rent. Interest rates are 7 percent.

4. Craig Jones owns a computer sales and repair business. He has decided to sell maintenance contracts with new computers that cover all repairs needed within three years of purchase. On average, each new computer needs $100 in repairs and maintenance per year during the first three years it is operated. (The $100 is the customers cost for maintenance, including parts, labor, and Craigs profit.) How much should Craig charge for a maintenance contract if interest rates are 13 percent?

5. You have just won the Florida lottery, and the jackpot was $10 million!! Your first major decision is how to take your prize winnings. You can choose $1 million a year for ten years or $5.65 million now. Which would you choose if you believe you can earn 10 percent interest on money you invest?