Questions -
Q1. Chuck Brown will receive from his investment cash flows of $3,155, $3,480, and $3,810 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at the end of three years?
Q2. Your brother has asked you to help him with choosing an investment. He has $4,400 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 0.0500 annually with the interest being paid quarterly. What will be the value of the investment in two years?
Q3. You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $22,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 0.05 annually. If you use a discount rate of 0.07 for investment products, what is the present value of this growing perpetuity?