Present value calculation

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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.

Reference no: EM131969340

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