Exercises

1. What is the present value of $206 received in 10 years with an annual discount rate of 2.5%?

2. What is the future value of perpetuity with a periodic annual payment of $1 and a 2.4% annual discount rate?

3. For a normal project, its NPV is negatively correlated with the discount rate. Why?

4. John deposits $5,000 in the bank for 25 years. If the annual rate is 0.25% per year, what is the future value?

5. If the annual payment is $55 with 20 years remaining, what is the present value if the annual discount rate is 5.41%, compounded semi-annually?

6. If Mary plans to have $2,400 by the end of year 5, how much does she have to save each year if the corresponding annual rate is 3.12%?

7. Why have we got a negative number of periods in the following code?

   >>>import scipy as sp
   >>> sp.nper(0.012,200,5000,0)
   -21.99461003591637

8. If a firm's earnings per share grows from $2 to $4 over a 9-year period (the total growth is 100%), what is its annual growth rate?

9. In this chapter, while writing a present...