Question 4: Anakin Skywalker is two years away from graduating from the Jedi Tra

Question

Question 4: Anakin Skywalker is two years away from graduating from the Jedi Training Academy. One potential employer, Darth Sidious, offers Anakin one-year internship that would start after Anakin graduates in two years. The internship pays $10,000, delivered at the start of the internship. If the interest rate is 5 percent, what is the present value of Darth Sidious' internship offer? C 1 $10,000 (1.05)2 $9,070 2) $10,000 (1.05)2 $11,025 C 3) $10,000 4) $10,000/1.05= $9,524 Question 5: If the interest rate is 2 percent, the value today (i.e, the present value) of a lump sum payment of $10,000 to be received one year from now is c i) S 10.000 * (1 + .02) = S 10,200 $10,000 * .02 = $200 3) $10,000 (.02) $9,804 2) C 4) $10,000 / (1-02)-$10,204 Question 6: Leonard is getting paid from his most recent grant. He has a choice between S10,000 today, or $15,000 in one year. He will choose the $10,000 today if: C 1) 10,000(1+)> 15,000 C 2) 15,000(1+r)>10,000 C 3) 10,000/(1+r)>15,000 C 4) 10,000(r)>15,000

Explanation / Answer

4) Option 1 is correct

PV = FV/(1 + r)n

PV = 10000/1.052

5)

Option 3 is correct

PV = FV/(1 + r)n

PV = 10000/1.02

c) Leonard will choose PV when:

PV > FV/(1 + r)

10000 x (1 + r) > 15000

Option 1 is correct

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