1. Find the Present Value of an annuity thay pays $1000 per year for 12 years at 10%? How would your answer change if the payments are made at the beginning of the year? ( Use Tables provided or the Formula to solve the problem)
2. What is the PV of a perpetuity of $100 per year if the appropriate discount rate is 7%? If the interest rates in general were doubled and the appropriate discount rate rose to 14%, what would happen to the present value of the perpetuity?
3. (4-14) Find the present values of the following cash flow streams interest rate 8% eg 100/1.08^ + 400/1.08^2 +400/1.08^3 etc Year Cash Stream A Cash Stream B 1 $ 100 $ 300 2 400 400 3 400 400 4 400 400 5 300 100
4. What is the value of each cash flow stream at a 0% interest rate? (Hint. Total the Cash flow amount)
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