1. What should you be willing to pay for an investment that promises $8 per year forever, if your required return is 8% per year?
2. What should you be willing to pay for an investment that promises $50 per year over 5 years, with the first $50 received one year from today, if your required return is 10% per year?
3. What should you be willing to pay for an investment that promises $50 per year over 5 years, with the first $50 received today, if your required return is 10% per year?
4. You invest $50 per year over 10 years, with the first $50 invested one year from today, in a financial security that offers 6% return per year. What is that investment worth at the end of its 10 year life? Assume you make no withdrawals during those 10 years.