FUTURE VALUE -

(a) How much money would you have in a year if you put $1,000 in the bank at an annual interest rate of 3 percent? How much would you have if you left all of that money in the bank for another year and annual interest rates increased to 4 percent in the second year? (PLEASE INCLUDE FORMULAS UTILIZED TO SOLVE PROBLEM)

(b) How much money would you have in a year if you put $2,500 in the bank at an annual interest rate of 4 percent? How much would you have if you left all of that money in the bank for another year and annual interest rates increased at 5 percent in the second year? (PLEASE INCLUDE FORMULAS UTILIZED TO SOLVE PROBLEM)

PRESENT VALUE OF A LOAN

(c) How much would you loan your brother-in-law if he said he could repay you $100 in six months, $200 in a year, and $500 in two years if you can get 2 percent interest from the bank on a six month CD? Show that you are in fact indifferent between the loan and putting your money in the bank for the next two years. (PLEASE INCLUDE FORMULAS UTILIZED TO SOLVE PROBLEM)

(d) How much would you loan your nephew if he said he could repay you $300 in six months, $400 in a year, and $600 in two years if you can get 3 percent interest from the bank on a six month CD? Show that you are in fact indifferent between the loan and putting your money in the bank for the next two years. (PLEASE INCLUDE FORMULAS UTILIZED TO SOLVE PROBLEM)