Many financial decisions require the analysis of uneven, or nonconstant, cash flows. Common stock dividends typically increase over time, and investments in capital equipment almost always generate uneven cash flows. The term cash flow (CF) denotes weven cash flows, while payment (PMT) designates equal cash flows coming at regular intervals. The present value of an uneven cash flow stream is the sum of the PVs of the individual cash flows. The equation is: PV = 0 + + + + + Similarly, the future value of an uneven cash flow stream is the sum of the PVs of the individual cash flows. Many calculators have an NPV key that lets you obtain the FV. However, if your calculator doesn't have a net future value (NFV) key, you can calculate the NFV as follows: NFV - NPV X (1+1) One can also find the interest rate of the uneven cash flow stream with a financial calculator and solving for the internal rate ofretum (IRR): using the key Quantitative ProblemYou own a security with the cash flows shown below. 610 385 260 280 If you require an annual return of 12, what is the present value of this cash flow stream? Do not round intermediate calculations. Round your answer to the nearest cent. $ 1274.54 Grade It Now Save & Continue Continue without saving MacBook Pro Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal Interest rate (INOM) and the effective annual rate (CAR). The nominal Interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR). If the compounding periods for different securities is the same, then you can use the APR for comparison. If the securities have different compounding periods, then the EAR : must be used for comparison compounding, then the nominal interest rate is also Here, Mis the number of compounding periods per year and INOM/M is equal to the periodic rate ( TR). If a loan or investment uses annual its effective annual rate. However, if compounding occurs more than once a year, EAR is equal to INOM Quantitative Problem: Bank 1 lends funds at a nominal rate of 10% with payments to be made semiannually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal interest rate will they charge their customers? Do not round Intermediate calculations, Round your answer to three decimal places. Grade It Now Save & Continue Continue without saving MacBook Pro awERTYuliol