What is the approximate present value

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Reference no: EM131192479

1. You have an asset that will pay you a first payment of $10 in 2 years, then every year for the next 100 years. Assuming a cost of capital of 10%, what is the approximate present value of these 101 payments?

a. $99.99

b. $90.90

c. $1,515,767

d. $627.67

2. Assume that your savings account will return a constant 10%. You will deposit $1000 today and plan to perpetually increase the size of the deposit by 5% each year, forever. Immediately after making a deposit 10 years from now, how much will be in your savings account?

a. $7,439.81

b. $22,855.55

c. $21,890.70

d. $19,296.96

3. Consider an asset that will pay you $10 today and every year for the next 100 years. Assume a constant cost of capital of 10%. Suppose you receive the asset today (right before the first payment), but will only pay for it 10 years later. That is, you will pay the appropriate future value of this asset 10 years from now. How much would you be willing to pay for the asset in 10 years?

a. $99.99

b. $285.29

c. $159.37

d. $259.35

e. none of the above

Reference no: EM131192479

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