1. Explain why the present value of a cash flow stream, and the asset associated therewith; fluctuate in value with the level of interest rates in the capital markets.
2. A construction cost index stood at 180 when the subject property was built for $85,000. What is the current estimated cost of the house if the index now stands at 333?
3. You have been offered the opportunity to invest in a project that will pay $4,131 per year at the end of years one through three and $14,702 per year at the end of years four and five. If the appropriate discount rate is 10.1 percent per year, what is the present value of this cash flow pattern?