Question

Calculate the future value in 5 years of $2100 today with annual compounding and a 10% annual interest rate. Suppose someone saves $1000 today and will have $1052 one year from today. If compounding is daily (assume 365 days in a year), what must be the interest rate on this account? Jane offers Kathy the following deal. Jane will give Kathy $900 today if Kathy gives Jane $1100 in 2 years-time. Suppose there is quarterly compounding and the quarterly interest rate is 3%. Should Kathy accept this deal? Provide a calculation. Suppose Jane had been thinking about offering Kathy a trade of $900 for $1300 in 2 years-time. With quarterly compounding, what would the quarterly interest rate have needed to be to make that a fair trade? Provide a calculation. Suppose there is a current cash flow of $5 that is expected to grow by 14% each year. If the annual interest rate is 15%, what is the present value of this stream of cash flows? om parte), what would be the future value of that same stream of cash 2 years from now? Suppose the present value of a growing perpetuity is $2100. If the annual interest rate is 10%, and the current cash flow is $100, what must be the growth rate of this perpetuity?

Answer 1