1. You are considering an investment that will pay you $1330 in one year, $2082 in two years and $3911 in three years. If you want to earn 8% on your money, how much will you be willing to pay? Round and answer to the nearest cent.
Please show all steps and write out how you get the numbers.
2. What is the lower bound of a European foreign currency call if the spot rate is $2.25, the domestic interest rate is 5.5 percent, the foreign interest rate is 6.2 percent, the option expires in three months, and the exercise price is $2.20? (The interest rates are continuously compounded.) show your work.