Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 ) Uneven Cash Flow Stream a . Find the present values of the following cash flow streams. The appropriate interest rate is 1 0

1) Uneven Cash Flow Stream
a. Find the present values of the following cash flow streams. The appropriate interest rate is 10%.(Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0=0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent.
Year Cash Stream A Cash Stream B
1 $100 $250
2400400
3400400
4400400
5250100
Stream A: $ ____
Stream B: $ ____
b. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar.
Stream A $ ____
Stream B $ ____
2) Effective Rate of Interest
Find the interest rate (or rates of return) in each of the following situations. Do not round intermediate calculations. Round your answers to the nearest whole number.
a. You borrow $720 and promise to pay back $756 at the end of 1 year.
____%
b. You lend $720 and receive a promise to be paid $756 at the end of 1 year.
____%
c. You borrow $70,000 and promise to pay back $295,837 at the end of 11 years.
____%
d. You borrow $8,000 and promise to make payments of $2,219.30 at the end of each of the next 5 years.
____%
3) Future Value for Various Compounding Periods
Find the amount to which $600 will grow under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.
a.12% compounded annually for 5 years.
$ ____
b.12% compounded semiannually for 5 years.
$ ____
c.12% compounded quarterly for 5 years.
$ ____
d.12% compounded monthly for 5 years.
$ ____
4) Present Value for Various Compounding Periods
Find the present value of $350 due in the future under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.
a.12% nominal rate, semiannual compounding, discounted back 5 years.
$ ____
b.12% nominal rate, quarterly compounding, discounted back 5 years.
$ ____
c.12% nominal rate, monthly compounding, discounted back 1 year.
$ ____

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investment Science

Authors: David G. Luenberger

1st Edition

0195108094, 978-0195108095

More Books

Students also viewed these Finance questions

Question

L A -r- P[N]

Answered: 1 week ago