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What is the present value of your windfall

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Question 1 - You have just received a windfall from an investment you made in a friend's business. She will be paying you $10000 at the end of this year, $20000 at the end of the following year, and $30000 at the end of the year after that (three years from today). The interest rate is 3.5% per year.

a. What is the present value of your windfall?

b. What is the future value of your windfall in three years (on the date of the last payment)?

Question 2 - The British government has a consol bond outstanding paying $100 per year forever. Assume the current interest rate is 4% per year.

a. What is the value of the bond immediately after a payment is made?

b. What is the value of the bond immediately before a payment is made?

Reference no: EM133152281

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