Problem 1 Using what you learned in Lesson 1, please complete the following table: (Use either Excel formulas or your financial calculator.) A B FV $ 100,000.00 $ 100,000.00 $ 100,000.00 1 2% 5% 10% N 5 5 5 PV D $ 100,000.00 15% 5 E $ 100,000.00 25% 5 Do your answers range from $90,573 to $32,768? The higher the "," the lower the "PV," right? (If not, please check your work.) The "T" in this case is out Discount Rate. Now picture that A through E above all represent investments of varying risks and you are analyzing how much to pay for each investment. Yes, they all have a potential payout of $100,000, but A is much less risky than E. But you are willing to purchase E, but only if you pay signicantly less, because that will make the rate of return much higher, which offsets the risk. In other words, if you pay less for E, you are paying less now to receive the full $100,000 in 5 years. Problem 2 Fill in the yellow blanks with the name of the appropriate discount rate, considering the risk level, 5 being the riskiest. Possible Discount Rates 1% 5% 15% 50% 200% Discount Rate Risk Level 4 5 Investment Bitcoin Asteroid mining T-Bills DFW Real Estate S&P 500 1 3 2 If you gave T-bills the lowest discount rate and asteroid mining the highest, pay yourself on the back. You're well on your way to being a real estate investment analyst. What if the order of risk for the investments stayed the same, but, altough it's not realistic, a discount rate of 10% was appropriate for T-Bills? Would that change the discount rate we would require for the S&P 500? Of course it would, if T-Bills are discounted at 10% while the S&P 500 is only discounted at 5%, we are saying that the S&P 500 is less risky than T-Bills, government securites that are essentially risk free