Present Value

1) What is the maximum that you would be willing to loan your brother for a $100 IOU if he promises to pay you back at the end of the year? You want to earn an annual rate of return of 12%.

A) $82.00

B) $89.29

C) $92.73

D) $88.00

2) What rate are you earning if you agree to pay $100 today for an IOU for $500 due in 20 years?

A) 4%

B) 5%

C) 6%

D) 7%

E) 8%

3) If you are willing to loan someone $100 and expect to be paid back $200 and earn 12% on your investment, approximately when would you need to be paid back?

A) 4 years

B) 5 years

C) 6 years

D) 7 years

E) 8 years