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Q.2(a) Mr. Kevin has been offered a future payment to repay $60,000 three years from today. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity cost today? (1 mark)

(b) A loaf of bread was $0.30 in 1980 which increased to $0.65 in 1986. If the price increase occurred as a result of inflation, what rate of interest would be prevailing in the economy during this time period? (1 mark)

(c) You buy the house under mortgage plan with yearly payment of $30,000. If this mortgage plan requires payments to be made for 25 years with interest rate of 8%, how much would the house cost you under this mortgage plan? (2 marks)

(d) How much must you save at the end of each of the next 10 years to have $100,000 at the end of the 10^th year if the interest rate is 10%? (1 mark)