5. Find the expected value assuming the risk factor is 20 % and the interest rate is

12% , if you will receive $20,000 one year from today.

6. Find the expected value assuming the risk factor is 20 % and the interest rate is

12% , if you will receive $20,000 two years from today.

7. Assume a firm is planning to buy some new equipment. Use the following information to figure out the net present discounted value of each investment expenditure and, therefore, how many units of capital (machines) the firm should buy. Assume each machine has a life span of three years.

P_k= $13,500

r =8%

MRP of first machine bought= $7,500

MRP of second machine bought= $6,000

MRP of third machine bought= $5,000

MRP of fourth machine bought= $4,600