1 calculate the present value of each of the following

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1. Calculate the present value of each of the following future payments

a. a $10,000 lump sum received 1 year from now if the market interest rate is 8 percent

b. a $10,000 lump sum received 2 year from now if the market interest rate is 10 percent

c. a $10,000 lump sum received 3 year from now if the market interest rate is 5 percent

d. a $25,000 lump sum received 1 year from now if the market interest rate is 12 percent

e. a $25,000 lump sum received 1 year from now if the market interest rate is 10 percent

f. A perpetuity of $500 per year if the market interest rate is 6 percent

2. present value of an income stream

suppose the market interest rate is 10 percent. Would you be willing to lend $10,000 if you were guaranteed to receive $1,000 at the end of each of the next 12 years plus a $5,000 payment 15 years from now? Why or Why not?

Reference no: EM13377105

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