1:

What will be the present value of $25,000 to be received in ten years from now if the annual rate is 7.0%?

Question 2:

Peter Chan has deposited $20,000 in a guaranteed investment account with a promised rate of 5% compounded annually. He plans to leave it there for 10 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make?

Question 3:

Mr. Fish wants to build a house in 5 years. He estimates that the total cost will be $250,000. If he can put aside $40,000 at the end of each year (i.e., t=1, 2, 3, 4, and 5), what rate of return must he earn in order to have the amount needed?

Question 4:

Suppose that your required rate of return is 12 percent. You are offered an investment into an asset that will yield $120,800 at the end of the fifth year. What is the maximum price that you would be willing to pay for this asset?

Question 5:

Toyota is offering “36-month $0 down, 2.45% APR (Annual Percentage Rate)” financing on a car you have decided to buy. That stated price for the car is $35,000.

What are the monthly payments required for Toyota’s special-financing deal?

Question 6:

You are to receive $80 payment indefinitely. The market rate of interest for these types of payments is 8%. What should be the price you would pay for this stream of cash flows?

Question 7:

Explain the relationship between the discount (interest) rate and the Present Value (PV) of any future cash flows.

Question 8:

Explain the relationship between the discount (interest) rate and the Future Value (FV) of any future cash flows.