Assume an interest rate of 7% in answering the following question.
(a) You would be indifferent between getting $12 now and X dollars two years from now. What is X?
(b) What is the present value of an asset that pays $20 one year from now, $15 two years from now, and $45 ten years from now?
(c) What is the formula for the present value of an asset that pays $8 per year every year for the next 10 years, and nothing thereafter? Use the formula to calculate the present value of this asset.
(d) What is the formula for the present value of an asset that pays $8 per year forever? Use the formula to calculate the present value of this asset.