Q.1 Suppose your employer offers you a choice between a $5000 bonus and 100 shares of the companys stock. Whichever one you choose will be awarded today. The stock is currently trading for $63 per share.

a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value?

b. Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on?

Q.2. You have a used CD store. At an estate sale, you can purchase 260 compact discs for $400. You believe you could sell the CDs for an average of $2.50 each. What is the net benefit of buying the CDs at the estate sale and selling them in your store?

Q.3. A dollar today and a dollar in one year may be considered to be equivalent. Is this statement is True or False?

Q.4.You have $100 and a bank is offering 5% interest on deposits. If you deposit the money in the bank, how much you will have in one year?

Q.5.You expect to have $1000 in one year. A bank is offering loans at 6% interest per year. How much can you borrow today?

Q.6. What is the present value (PV) of $80,000 received ten years from now, assuming the interest rate is 5% per year?

Q.7. What is the future value (FV) of $60,000 in five years, assuming the interest rate is 5% per year?