Question 1: Explain why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class.
Question 2: Calculate the future value of the following:
a. $500 if invested for five years at a 4% interest rate
b. $150 if invested for three years at a 9% interest rate
c. $9100 if invested for seven years at an 3% interest rate
d. $1000 if invested for ten years with a 0.5% interest rate
Question 3: Calculate the present value of the following:
a. $7700 to be received three years from now with a 5% Interest rate
b. $1500 to be received five years from now with a 7% interest rate
c. $7200 to received two years from now with a 11% interest rate
d. $680,000 to be received eight years from now with a 9% interest rate.
Question 4. Suppose you are to receive a stream of annual payments (also called an "annuity") of $3000 every year for three years starting this year. The interest rate is 3%. What is the present value of these three payments?
Question 5. Suppose you are to receive a payment of $5000 every year for three years. You are depositing these payments in a bank account that pays 2% interest. Given these three payments and this interest rate, how much will be in your bank account in three years?