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1.An interest rate of 12% effective two year rate is equivalent to a rate of _________ effective annual rate. 6% 12% 11.66% 5.83% 2.Assume the
1.An interest rate of 12% effective two year rate is equivalent to a rate of _________ effective annual rate.
6%
12%
11.66%
5.83%
2.Assume the following scenario:
Bob plans to retire in 20 years from now and wants to have the following stream of CFs after retirement.
- Monthly payments of $4,000 for 15 years starting right after retirement (The first payment will be at the end of the first month in year 21).
- He then needs an extra 50000$ with the final payment (final month of year 35).
- Starting from year 36, he wants the monthly payments to be 6000$ for 10 years (The first payment will be at the end of the first month in year 36).
- And finally, starting from year 46, he wants the monthly payments to grow at 0.5% per month forever (first payment will be at the end of the first month in year 46).
The APR is 12% with quarterly compounding.
What is present value (at t = 0) of this retirement plan?
45044
33444
55905
65888
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