FVs=PV(1+1)N 1. Suppose you deposit $100 in an account with an annual interest rate of 6%. What is the future value of this $100 in three years? PV=FVn/(1+1)k 2. Suppose your aunt gives you a bond that will pay out a lump sum of $100 three vears from now. If the annual interest rate is 6%, what is the present value of this bond today? I=(PVFVN)1/N1 3. What interest rate is required to make $100 grow to $119,10 in three years? N=ln(1+I)ln(PVFVN) 4. If the interest rate is 6%, how long will it take for your bank account balance to grow from $1,000 to 1,500 ? Annuities A constant payment is made over regular intervals for some period of time. An ordinary annulty has payments starting one perlod from now, while an annuity due has payments that begin immediately. Read questions carefully. Future value of an annuity What is the future value of a 3 -year annuity, if $100 payments are made at the end of each vear and the interest rate is 6\%? Present value of an annuity An investment advisor suggests that you buy an annuity that pays $1,000 at the end of each of the next 10 years. If the interest rate is 6%, what price are you willing to pay for this annuity? Annuity due: Today is your birthday, and your uncle gives you $1,000 to save for a down payment on a new house. Your bank account pays 6% interest, and your uncle promises an additional $1,000 on each of your next four birthdays. How much will you have saved five vears from today? You just won the lottery and will receive 10 annual $100,000 payments, starting today, Instead, you could take one lump sum today. If the appropriate interest rate is 6%, how large should the lump sum be