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Each of the problems below provides practice with present value calculations.a. At an annual interest rate of 3.5 percent, what is the present value”

by | Mar 12, 2022 | Uncategorized

Each of the problems below provides practice with present value calculations.a. At an annual interest rate of 3.5 percent, what is the present value of a single payment of $1000 to be received one year from now?b. At an annual interest rate of 3.5 percent, what is the present value of a single payment of $1000 to be received three years from now?c. At an annual interest rate of 3.5 percent, what is the present value of a stream of payments of $1000, each to be received at the end of one year, two years, and three years?d. What is the present value of a lottery prize that pays you $1 million today plus $1 million one year from now plus $1 million two years from now?e. How much would you need to deposit today in a bank account paying 4 percent interest if you want to withdraw $5000 one year from now?f. If your friend offers to loan you $12 000 today to buy a used car, and wants you to repay him $13 500 in two years, should you accept this offer? The market interest rate on a loan from the bank is 4 percent.

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