1. As you increase the length of time involved, what happens to future values? What happens to present values?

1. Why would General Motors Corp. be willing to accept such a small amount today ($25,000) in exchange for a promise to repay four times that amount ($100,000) in 30 years? What is this a reflection of?

1. Suppose a project has conventional cash flows and a positive NPV. What do you know about its payback period? Its discounted payback period? Its profitability index? Its IRR? Explain.

1. How does a bond issuer decide on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required return on a bond.