Practice Calculating the Present Value of an Uneven Cash Flow Stream (5-12 of the textbook) (skip 5-13 and 5-14 of the textbook) Consider an investment that pays $299 in 1 years and $855 in 7 years. Calculate the present value if the discount rate (1) is 5% hint calculate the present value of 299 and then the present value of 855 then add these two present values together Non-annual compounding: Seo Section 5-15 for formulas and examples So far, we have focused on annual compounding What about compounding that is not annual Calm the compounding frequency each year, semiannual (m=2) quarterly (4) monthly (m-12) daily (365) Whenever payments occur more than once a year, you must make two conversions (1) Convert the stated interest rate into a periodic rate - In finance, interest rates are always quoted on an annual basis this is called the APR) (23Convoit the number of years into 'number of periods. It is common to communicate in terms of years, but what we are interested is number of pay periods Here is an example, it m-12, then we need to know how much interest is paid each month and also how many months the interest is paid Consider an investment that paya interest monthly for yours with an annual interest rate of 7%. Which of the following are true? ON- & years / 12 months - 66.67 periodo VY7% 12 months 14 monthly interest rate ON-year / 12 months 66.67 periode VY - 7%/ 12 months 5.833% monthly interest rate ON = 8 years 12 months = 96 periods VY7% 12 months 84% monthly interest rate ON = 8 years 12 months = 96 periods V = 7%/ 12 months 5.833% monthly interest rate