1.

Compounding with Different Interest Rates A deposit of $350 earns the following interest rates: 8 percent in the first year, 6 percent in the second year, and 5 percent in the third year. What would be the third year future alue! "he ti#e line for this proble# is: $eriod 0 (ash )low *350 8% & 6% ' 5% 3 years + FV , PV - .& / i0 .& / j0 .& / k0 FV , $350 - .& / 0.080 .& / 0.060 .& / 0.050 , $350 - &.08 - &.06 - &.05 , $1'0.2& 2. Present Value with Different Discount Rates (o#pute the present alue of $&,000 paid in three years using the following discount rates: 6 percent in the first year, 2 percent in the second year, and 8 percent in the third year. PV , FV / 3.& / i0 .& / j0 .& / k04 PV , $&,000 / 3.& / 0.060 .& / 0.020 .& / 0.0804 , $&,000 5 3&.06 - &.02 - &.084 , $&,000 5 &.''161 , $8&6.32