Each of the following situations is independent. Work out your own solution to each situation, and thencheck it against the solution provided.2. The Morgans would like to send their daughter to a music camp at the end of each of the next fiveyears. The camp costs $1,000 a year. What lump-sum amount would have to be invested now to have$1,000 at the end of each year if the rate of return is:a. Eight percent?b. Twelve percent?

3. A village has six residents, each of whom has accumulated savings of $100. Each villager can use this money either to buy a government bond that pays 15% per year. Or they can buy a llama, send it onto the commons to graze and then sell it after one year. The price the villager gets for selling the llama depends on quality of fleece it grows. The quality of fleece depends on how many llamas are grazing. At the end of the year the villager will have $115 if they buy the bond or $109-$122 if they buy the llama depending on how many llamas are purchased Number of Llamas 1 2 3 4 5 6 Price per Llama 122 118 116 114 112 109 a. If each villager decides individually how to invest, how many llamas will be sent onto the commons and what will be the net village income? b. What is the socially optimal number of llamas for this village? c. The village committee votes to auction the right to graze the llamas to the highest bidder. How much will the grazing right sell for? What will be the net…

A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $32,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 10 percent, how much must the donor contribute today to fully fund the scholarship? Note: Negative value should be indicated by a parenthesis. > Answer is complete but not entirely correct. $(240,421) X Contribution

Your younger sibling asks you to borrow $20. You, a smart financial professional, agree but also charge interest on the $20. You plan to collect $5 from your sibling each week for 8 weeks to repay the initial loan. What is the NPV of this project, assuming you invest the $5 at 12%? a. $4.84 b. $2.11 c. $0 d. $6.88