**Q1.Answer:**

For a PEA to be worthwhile, its present value to you now must be at least $25,000. In 10 years, the PEA will be worth $50,000, and its present value to you now is $50,000/(1 + r) 10, where r is your personal discount rate. Thus,

$50,000/ (1+r) 10 = $25,000 or

$50,000/$25,000 = (1+r) 10

2 = (1+r) 10

(1+r) = (2)1/10

(1+r) = 1.0718

r = 0.0718

Your personal discount rate needs to be 7.18% or less for the PEA to be worth investing in.

**Q2. Answer: **

This is annuity due

Fv = PV× ((1+r) ^t) – 1/r) × (1+r)

So 150 × (1+10/12^25×12))-1)/0.10/12 × (1+10/12) =$200,683.5522.

Yes the worker will have $200,000 at the end of the 25 years if he will be contributing 150 per year.

**Q3.Answer **

FV = PV * (1+i) ^n.

*Therefore, *

= (468,000 = 136,000 × (1.08) ^t)

= (468,000 ÷ 136,000 = ((136,000) × (1.08) ^t)) ÷ 136,000)

= (3.441176471 = (1.08) ^t)

**= (ln3.441176471÷ ln1.08 = T so T = 9.3608817%**

**Q4. Answer**

FV = PV * (1+i) ^n.

*Therefore, *

= (392,000 = 112,000 × (1+R) ^14)

= (392,000 ÷ 112,000 = ((112,000) × (1+R) ^14)) ÷ 112,000)

= 3.5(1/14) = (1+R) ^ (14×1/14) =14 √3.5 -1) = R

= **so R = 9.3608817%**