Homework # 3 Instructions: Answer all questions below. Make sure to show your work. Your answers must be typed. (TOTAL = 100 POINTS) 1. Consider the following cash flow streams: Year Cash Stream A 1 $100 2. 400 3 400 4 400 5 300 Cash Stream B $300 400 400 400 100 The appropriate discount rate is 12 percent. a. What is the present value of each cash flow stream? b. What is the future value of each cash flow stream? c. What is the value of each cash flow stream at Year 3? 2. Suppose you wish to save $2,000 at the end of five years by making the following deposits: Year Deposits 1 $100 2 3 400 4 400 300 400 What interest rate must you earn? $1000 3. Suppose an investment promises to pay the following cash flows: Year Deposits 1 2. 3 3000 4 4000 5 3000 4000 If the interest rate is 8%, what is the highest price you are willing to pay? 4. Find the present value of the following annuity due: $375 per month, for ten years, at 9 percent simple rate. Make sure to show your work