Find the following values for the lump sum assuming annual compounding:
The future value of $500 invested at 8 percent for one year.
The future value of $500 invested at 8 percent for five years.
The present value of $500 to be received in one year when the opportunity cost rate is 8 percent.
The present value of $500 to be received in five years when the opportunity cost rate is 8 percent.
2 Repeat Problem 9.1 above, but assume the following compounding conditions:
a. Semiannual
b. Quarterly
4 Find the following values assuming a regular, or ordinary, annuity:
a. The present value of $400 per year for ten years at 10 percent.
b. The future value of $400 per year for ten years at 10 percent.
c. The present value of $200 per year for five years at 5 percent.
d. The future value of $200 per year for five years at 5 percent.
6 Consider the following uneven cash flow stream:
Year Cash Flow
0 $0
1 250
2 400
3 500
4 600
5 600
a. What is the present (Year 0) value if the opportunity cost (discount) rate is 10 percent?
b. Add an outflow (or cost) of $1000 at Year 0. What is the present value (or net present value) of the stream?