12 May 9.1 Find the following values for a lump sum assuming annual compounding:
9.1 Find the following values for a lump sum assuming annual compounding:
a The future value of $500 invested at 8 percent for one year
b The future value of $500 invested at 8 percent for five years
c The present value of $500 to be received in one year when the opportunity cost rate is 8 percent
d The present value of $500 to be received in five years when the opportunity cost rate is 8
percent
9.4 Find the following values assuming a regular, or ordinary, annuity:
a The present value of $400 per year for ten years at 10 percent
b The future value of $400 per year for ten years at 10 percent
c The present value of $200 per year for five years at 5 percent
d The future value of $200 per year for five years at 5
9.6 Consider the following uneven cash flow stream:
Year Cash Flow
0 $0
1 250
2 400
3 500
4 600
5 600
a What is the present (Year 0) value if the opportunity cost (discount) rate
is 10 percent?
9.7 Consider another uneven cash flow stream:
a What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10
percent?
b What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in
an account that pays 10 percent annually
9.9 Assume that you just won $35 million in the Florida lottery, and hence the state
will pay you 20 annual payments of $1.75 million each beginning immediately. If
the rate of return on securities of similar risk to the lottery earnings (e.g., the
rate on 20-year U.S. Treasury bonds) is 6 percent, what is the present value of
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