Topic 2: Exercises on present value 1/ Present values for single-period. Let's say you need $400 to buy textbooks next year. You can earn 7 %/year. How much should you save today? 2/ Present values or multiple periods. Let's say you need $1,000 in the next two years. If you can earn 7 percent, how much do you Must invest now to ensure that you will have $1,000 in the next 2 years? 3/Your uncle promises to give you $10,000 in the next 10 years. If the interest rate is 12%/year, how much is the gift worth today? 4/ Saving up. You want to buy a new car. You have $50,000, but this car costs $ 68,500. If you can earn 9% today, how much should you invest today to buy a car in two years? Do you have enough money to buy an car? Assume the car price does not change. Explain. 5/ Evaluating investments: Company A purchases an asset for $335. The company plans to sell off the assets in the next three years for $ 400. However, the company is considering investing $335 elsewhere at 10% interest. Which investment do you recommend the company choose (sell all assets in the next 3 years or invest elsewhere)? (Try two ways to calculate future and present value ) 6/ Calculating present values. Let's say you just celebrated your 19th birthday. A rich uncle creates an investment fund that will give you $ 150,000 when you turn 30. If the corresponding discount rate is 9 % how much should your uncle invest today?