a) A principal of $2,000 is invested at 5% for ten years. Determine the future value if the interest is compounded: i. Annually (5 marks) ii. Semi-annually (5 marks) iii. Monthly (5 marks) iv. Continuously (5 marks) A firm's project requires an initial investment of £20 million today (at the beginning of year 1) and is expected to yield the following after tax cash flows at the end of years 1,2 and 3 : Assuming a discount rate of 12% : v. Calculate the project's NPV (net present value) (5 marks) vi. On the basis of your NPV calculation, would you advise the firm to accept the project or reject the project? (5 marks) vii. Explain your reasons for your advice to accept or reject the project ( 5 marks) A corporate bond has three years to redemption. It has a principle value of $1,000 and pays interest of $50 a year. Assume that the next interest payment is due at the end of the year. The market yield on the bond is 7%. viii. Calculate the present market value of the bond ( 5 marks)