Question
Part A. Using a discount rate of 9.3 percent, compute the present value of the following cash flows to the nearest dollar: Year Cash Flow
Part A.
Using a discount rate of 9.3 percent, compute the present value of the following cash flows to the nearest dollar:
| Year | Cash Flow |
| 1 | $7,745 |
| 2 | $8,167 |
| 3 | $15,601 |
| 4 | $18,300 |
| 5 | $9,206
|
Part B.
Assuming a discount rate of 14 percent, what is the present value of the following stream of uneven cash flows over the next 10 years?
| Year 1 | $29,735 |
| Year 2 | $16,438 |
| Year 3 | $27,997 |
| Year 4 | $15,755 |
| Year 5 | $21,021 |
| Year 6 | $22,094 |
| Year 7 | $24,031 |
| Year 8 | $21,972 |
| Year 9 | $21,923 |
| Year 10 | $24,709 |
Part C. An investor is considering purchasing a financial security that promises to pay $510 per year for the next 3 years, then $3,015 per year for the next 2 years after that. If the investor thinks the appropriate discount rate is 10.4 percent for investments that have this level of risk, what would be the present value of those five payments today?
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Economics Of Money Banking And Financial Markets
Authors: Frederic Mishkin
5th Edition
0134734203, 978-0134734200
