Question 1: If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?
Question 2: What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually?
Question 3: What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be?
Question 4: Find the present value of the following ordinary annuities
A. $400 per year for 10 years at 10%
B. $200 per year for 5 years at 5%
C. $400 per year for 5 years at 0%
D. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.
Question 5: Find the present values of the following cash flow streams. The appropriate interest rate is 8%
Year Cash Stream A Cash Stream B
1 $100 $300
2 400 400
3 400 400
4 400 400
5 300 100
B. What is the value of each cash flow stream at a 0% interest rate?