Q.1.What is the discount rate? How does the discount rate differ from the interest rate in the future value equation?
Q.2. Mr. John expects to need $50,000 as a down payment on a house in six years. How much does he need to invest today in an account paying 7.25 percent?
Q.3. Your birthday is coming up, and instead of other presents, your parents promised to give you $1,000 in cash. Since you have a part time job and thus do not need the cash immediately, you decide to invest the money in a bank CD that pays 5.2 percent quarterly for the next two years. How much money can you expect to gain in this period?
Q.4. How do an ordinary annuity, an annuity due, and a perpetuity differ?
Q.5. Identify the steps involved in computing the future value when you have multiple cash flows.
Q.6. Mr. Woolmer has an investment that will pay him the following cash flows over the next five years: $2,350, $2,725, $3,128, $3,366, and $3,695. If his investments typically earn 7.65 percent, what is the future value of the investment's cash flows at the end of five years?