You lend a friend $10,000, for which your friend will repay you $27,027 at the end of five years.

What interest rate are you charging your friend?

(b) You wish to retire in 10 years and to buy a house which currently cost $100,000 and is expected to increase in value each year at the rate of 5%. Assuming you can earn 10% annually on your investment, how much must you invest at the end of each of the next 10 years to be able to buy your dream home when you retire?