Chapter 4 Problems (3 4 7 11 16)3. Calculate the future value of $2000 ina. 5 years at an interest rate of 5% per year.b. 10 years at an interest rate of 5% per year.c. e years at an interest rate of 10% per year.d. Why is the amount of interest earner in part (a) less than half the amount of interest earned in part (b)?4. What is the present value of $20000 receiveda. 12 years from today when the interest rate is 4% per year?b. 20 years from today when the interest rate is 8% per year?c. 6 years from today when the interest rate is 2% per year?7.
You are thinking of retiring. Your retirement plan will pay you either
$250000 immediately on retirement or $350000 five years after the date
of your retirement. Which alternative should you choose if the interest
rate isa. 0% per year?b. 8% per year?c. 20% per year?11.
You have been offered a unique investment opportunity. If you invest
$10000 today you will receive $500 one year from now $1500 two years
from now and $10000 ten years from now.a. What is the NPV of the opportunity if the interest rate is 6% per year? Should you take the opportunity?b. What is the NPV of the opportunity if the interest rate is 2% per year? Should you take it now?16. What is the present value of $1000 paid at the end of each of the next 100 years if the interest rate is %7 per year?