1. Jed is considering the purchase of a unit investment trust (UIT) with a three-year life. The UIT promises a payment of $10,000 next year and the payments are expected to grow at 5% per year for the subsequent two years. If Jed’s required return on the investment is 10%, what should he be willing to pay for the UIT today?
2. What is the present value of an annual $1,471 perpetuity if the interest rate is 7.85% compounded annually? Please round your answer to the second decimal without dollar sign. E.g. 1.11.