A reliable friend has asked you for a loan. You are pondering various proposals for repayment.
1. Repayment of a $30,000 lump sum 4 years hence. How much will you lend if your desired rate of return is (a) 10% compounded annually, and (b) 20% compounded annually?
2. Repeat requirement 1, but assume the interest rates are compounded semiannually.
3. Suppose the loan is to be paid in full by equal payments of $8,000 at the end of each of the next 4 years. How much will you lend if your desired rate of return is (a) 10% compounded annually, and (b) 20% compounded annually?