In a Word document, please explain the following questions below. Very importantly - show all your work showing all of your steps and demonstrate a good understanding of the time value of money so I'll know what you're talking about.
1. In two to three paragraphs, explain why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class.
2. Calculate the future value of the following:
a. $600 if invested for five years at a 3% interest rate
b. $400 if invested for three years at a 5% interest rate
c. $1100 if invested for seven years at an 11% interest rate
d. $900 if invested for ten years with a 0% interest rate
3. Calculate the present value of the following:
a. $2200 to be received three years from now with a 5% discount rate
b. $950 to be received five years from now with a 11% interest rate
c. $2150 to received two years from now with a 24% interest rate
d. $145,000 to be received eight years from now with a 7% interest rate.
4. Suppose you are to receive a stream of annual payments (also called an "annuity") of $9000 every year for three years starting this year. The discount rate is 6%. What is the present value of these three payments?
5. Suppose you are to receive a payment of $5000 every year for three years. You are depositing these payments in a bank account that pays 2% interest. Given these three payments and this interest rate, how much will be in your bank account in three years?
The solution explains calculations relating to various time value of money problems