Question 1

Your grandmother will be giving you $10,000 every year for the next five years, the first payment beginning at the end of the first year

a.) What is the present value of these receivables if the interest rate is 6%?

b.) If you invest these receivables in a bank at 6%, what is the total value at the end of 10 years if you make withdrawals of $3,000 in years 9 and 10?

c.) An investor expects to receive $3,000 in year 2, $5,000 in year 5 and $7,000 in year 7. What is the present value of these payments if the interest rate is 8%?