Problem Set #$2$

Solve the below problems using the following equation from the textbook $($i$.$e$.,$ do not use the PV

key on your calculator$)$:

$PV=\frac{CF}{(1+i{)}^n}$

What is the PV of a payment of $$500$ to be received in two years with a simple interest rate of:

a$)5\%?$

B$)15\%?$

C$)25\%?$

Based on your answers to question #$1,$ what is the relationship between the present value and

the simple interest rate?

Calculate the present value for each of the following $($assume the annual interest rate is $5\%)$:

a$)$ $$100$ to be received in $4$ years.

b$)$ $$100$ to be paid in one year.

c$)$ A series of four $$25$ payments to be received $1,2,3,$ and $4$ years from now.

d$)$ A series of two $$50$ payments to be received $1$ and $2$ years from now.