Question 1: Suppose you are offered a savings account with an annual percentage rate of 4%. The effective annual rate will be?
Question 2: Suppose you invest in property with a perpetual cash flow. At the end of the first year you will receive $100 but the return will fall by 5% a year so that the second year's payment will be $95. If this 5% decline continues in perpetuity, what is the present value of the perpetual cash flow stream at a discount rate of 5% ?
Question 3: If the exchange rate between the U.S. dollar (USD) and the Swiss franc (CHF) is CHF1.5 per USD, the USD interest rate is 6% per year, and the CHF interest rate is 5% per year, what is the break-even value of the future CHF/USD exchange rate one year from now?