Question
For each of the following problems, draw the timeline, place the cash flows in the appropriate place on the timeline, and show which direction the
For each of the following problems, draw the timeline, place the cash flows in the appropriate place on the timeline, and show which direction the arrows should go (ie. discounting or compounding). Then solve the problem
a. Find the present value of a three-year annuity due with $500 payments and an 8% discount rate.
b. Find the present value of a $500 perpetuity with an 8% discount rate.
c. Suppose that you deposit $1000 into a savings account today, then deposit $2000 in one year, then $3000 the year after that. What will the future value of this account be at the end of 5 years if you can earn 8% on your money?
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