2.  

21. Assume that Investment A and Investment B are expected to generate the following cash flows: Year Annual Cash Flow - Investment A Annual Cash Flow - Investment B 1 $1000 $5000 2 $2000 $4000 3 $3000 $3000 $4000 $2000 $5000 $1000 4 5 If the appropriate discount rate for both investments is 0.0% p.a., which investment is better (i.e., which investment has a larger present value)? a. Investment A b. Investment B c. Since both investments return the same total amount (i.e., $15,000), they have the same present value. 22. Assume that Investment A and Investment B are expected to generate the following cash flows: Year Annual Cash Flow - Investment A Annual Cash Flow - Investment B 1 $1000 $5000 2 $2000 $4000 3 $3000 $3000 $4000 $2000 $5000 $1000 4 5 If the appropriate discount rate for both investments is 3.25% p.a., but with daily compounding, which investment is better (i.e., which investment has a larger present value)? a. Investment A b. Investment B c. Since both investments return the same total amount (i.e., $15,000), they have the same present value.