1. Your brother has offered to give you either $5000 today or $10,000 in 10 years. If the interest rate is 7% per year, which option is preferable?
2. Your bank pays 2.5% interest per year. You put $1000 in the bank today and $500 more in the bank in one year. How much will you have in the bank in two years?
Your cousin is currently 12 years old. She will be going to college in six years. Your aunt and uncle would like to have $100,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 4% per year, how much money do they need to put into the account today to ensure that they will have $100,000 in six years?
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