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ex 1.1 Year 1 Cash Flow $95.24 PV of $100 due in 1 year @ r = 5.0%: $100 1.05 PV of $100 due in
ex 1.1
Year 1 Cash Flow $95.24 PV of $100 due in 1 year @ r = 5.0%: $100 1.05 PV of $100 due in 1 year @r=5.0% : $100 1.050 $95.24 $95.24- $95.24 $95.24 0.0% Percentage change due to different r Year 20 Cash Flow $100 PV of $100 due in 20 years @r-5.0% : 1.0520 $37.69 $100 PV of $100 due in 20 years @r- 5.0% 105020 - $37.69 $37.69 $37.69 $37.69 0.0% Percentage change due to different %Inte5 10 15 20 3. The impact of interest rate changes in the PV of $100 due in 20 years compared to the PV of $100 due in one year ares a. smaller because interest rate changes have a greater impact on the near term cash flows thon distant cash flows. b. the same because the cash flow is the same, c. greater because interest rate changes have a greater impact on distant cash flows thon near term cash flows. d. sometimes less and sometmes more depending on the interest rate Shinc v 4. If the interest rate is less than 5%, then the ps for both the one year and 20 year investments 8. Decrease because the interest rate is lower b. Increase because the investments are discounted at a lower rate, c. Do not change becasue the investment amount is the same d. Might either increase or decrease Step by Step Solution
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