1. Jonathan bought a new IRead today from Able Emporium. He will pay $300 today to Able, will receive a rebate of $300 from Able in one year from today, and he will pay $500 to Able in three years from today. If the discount rate is 8 percent, then what is the present value of the cash flows associated with this transaction?
2. Tom and Linda Johnson currently have nothing saved for the college education of their only child, Lisa, who is 10 years old and will start college in exactly eight years. Tom and Linda believe they will need $150,000 on the day Lisa starts college. They also believe they can earn 5 percent per year on their investments. How much does Tom and Linda need to save each year for eight years to have exactly enough in eight years to pay for Lisa to go to college if they make their first contribution to savings in one year?
3. Leslie plans to deposit $1000 today, nothing next year and $2000 in two years, $3000 in three years,$4000 in four years. If she can earn 7 percent on her investments, how much will Leslie have at the end of four years? Assume interest will compound annually.