Q1. a) The present value of the following cash flow stream is $9,462 when discounted at 7 percent annually. What is the value of the missing cash flow?

Year Cash Flow 1 $2,200 2 ? 3 3,400 4 3,600

b) You are saving for the college education of your two children. They are two years apart in age; one will begin college 15 years from today and the other will begin 17 years from today. You estimate your childrens college expenses to be $45,000 per year per child, payable at the beginning of each school year. The annual interest rate is 7.5 percent. Q.No. 1 2 3 4 5 6 7 8 9 10 Marks Obtained/total Marks Marks Obtained Total Marks in Words: Name of the Teacher: Adil Pasha Who taught the course: Signature of Teacher/Examiner:

Page 2 of 2 How much money must you deposit in an account each year to fund your childrens education? Your deposits begin one year from today. You will make your last deposit when your oldest child enters college. Assume four years of college.