Problem 1) You expect your newly born child to attend college in 18 years. You have $12,000 to set aside for that purpose.
You also expect that the total cost of college education to be $100,000 by that time.
Calculate the interest rate at which you have to invest today to achieve your goal. SHOW CALCULATIONS AND WHAT NUMBERS GO INTO THE FORMULA.
Problem 2) Highlight Inc. is considering an investment project with the following cash flows:
YEAR Cash Flow
1 $300
2 $400
3 $600
4 $900
If the discount rate is 10% , calculate the present value of these cash flows.
What will be the present value if the discount rate is changed to 15%
SHOW CALCULATIONS AND WHAT NUMBERS GO INTO THE FORMULA.
For both problems, show calculations including intermediate calculations.