Present Value Calculation
1. Assume that you have a dollar today and the discount rate is 10%. If you invest it, how much it will grow to be in next year?
2. How much will it grow to be next year if the interest rate is 5%, instead of 10%?
3. Calculate the PV of a 2-year annuity paying $10 each time at the discount rate of 10%.
4. Calculate the PV of a 3-year annuity paying $10 each time at the discount rate of 10%.
5. Calculate the PV of a perpetuity paying $10 again the discount rate is 10%.
6. How much do you need to have now in order to have $110 next year? The interest or the discount rate is 10%.
7. “5-year yields tend to be lower than 10-year yields”: Answer true or false and explain briefly.