Name 1. Effective Annual rate (EAR) from APR 2. Team Calculate EAR from APR in table 1 below: APR Compounding period Applicable rate per compounding period (a) EAR 6 months 6% 6% 3% 1 0.03 1 6.09% 12 2 months 6 12% 1 month 8% 3 month 10% 6 months What is the present value of a 3-year annuity of $100 at 6% PV (1. (1. 3. (b) What is the present value of the annuity above, if the annuity starts after 2 years from today? PV (1. A factory costs $ 400,000. You forecast that the cash flow it produces are $ 120,000 after year 1, $ 180,000 after year 2 and $ 300,000 after year 3. With 12% discounting rate, calculate Present value of future cash flows (a) PV (1. (1. (b) Net present value of your investment NPV=- (c) Should you make this investment? 4. You will receive $100 from a savings bond in 3 years. The nominal (actual) rate is 3%. The future value of the bond is $. The present value of the bond is: If the rate of inflation is 1%, the real rate offered is With the real rate, the present value of the bond is