Response to the following questions
1. You decide to invest $100,000 in a program that is guaranteed to grow by 2.5% for each of the next 5 years. At the end of the 5 years, how much is your investment worth?
2. What is the effective annual rate of an investment that pays 6% for 5 years, compounded semiannually?
3. What is the present value of a single cash flow of $25,000 received at the end of 10 years, if we assume a discount rate of 5% annually? With a discount rate of 7%?
4. Suppose you deposit $100 in a savings account that compounds annually at 2%. After 1 year at this rate, the bank changes its rate of compounding to 1.5% annually. Assuming the compounding rate does not change for 4 additional years, how much will your account be worth at the end of the 5-year period?