1

What is the present value of the following uneven cash flow stream: $0 at time 0, $100 in Year 1, $200 in Year 2, $0 in Year 3, $400 in Year 4, and $100 in Year 5 if the interest rate is 8%?

Question 2 options:

	$568.07
	$585.12
	$558.07
	$626.13

2

Your grandfather has offered you a choice of one of the three following alternatives: $5,000 now; $1,000 a year for eight years; or $12,000 at then end of eight years. Assume that the rate of interest will remain 11 percent annually for the next 8 years. How much would you receive at the end of 8 years if your grandfather deposits $1,000 a year for the next 8 years?

Question 3 options:

	$11,855.40
	$11,500.45
	$11,859.43
	$12,500.25

3

Suppose, you could borrow using either a credit card that charges 1% per month or a bank loan with a 12% quoted nominal interest rate that is compounded semi-annually. What is the effective annual rates for borrowing from the credit card? What is the effective annual rates for borrowing from the bank? Who should you borrow from?

Question 7 options:

	EFF% (Credit Card) = 12.55%, EFF%(Bank Loan) = 12.68%, Borrow from the credit card.
	EFF% (Credit Card) = 12.68%, EFF%(Bank Loan) = 12.36%, Borrow from bank.
	EFF% (Credit Card) = 12.68%, EFF%(Bank Loan) = 12.55%, Borrow from the bank.
	EFF% (Credit Card) = 12.34%, EFF%(Bank Loan) = 12.68%, Borrow from the credit card.