Problem 1: Your friend has given you a hot tip about an investment deal that will pay off $6,000 a year at the end of each of the next three years. If your required rate of return for investments with this degree of risk is 7%, approximately how much is the investment worth to you today?
Problem 2: You've been offered the opportunity to invest $200,000 for 10 years in return for 10 annual payments of $30,000 each. What annual percent rate return will you get if you take the deal?
a. Between 20 and 21%
b. Between 16 and 17%
c. Between 8 and 9%
Problem 3: From a financial point of view, which is the best choice, to receive $800 now, or a note that promises $1,000 three years from now? Threeyear interest rates are 7%.
a. $800 now
b. $1,000 three years from now