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1) Determine the present value (PV) of each of given investments?

a) $6,000 due in 10 years discounted at a 10 annual rate.

b) $4,000 due in 5 years at a 6% annual rate, with quarterly discounting.

c) $12,000 due in 8 years at a 12% annual rate, with monthly discounting.

2) Determine the present value of given perpetuities?

a) Perpetuity with $1000 annual payment discounted at 10% back to today (i.e., the PV at t = 0).

b) Perpetuity with $500 annual payment, with first payment received 2 years from today, discounted at 6% back to today (again, the PV at t = 0).

3) You plan to deposit $250 into the savings account for each of five years, beginning 1 year from now. Interest rate is 9% compounded annually. Determine the future value in each of the following cases?

a) At the end of five years?

b) At the end of six years if no extra deposits are made?

c) At the end of five years, as in (a), if the extra $250 is deposited today (i.e., at t = 0), so that there are 6 deposits of $250 each?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915194

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