Question
Show your work (use of formula, etc.) in solving the problems. Provide your answers/solutions in the answer space provided below. Answer all questions. 1.- Find
Show your work (use of formula, etc.) in solving the problems.
Provide your answers/solutions in the answer space provided below. Answer all questions.
1.- Find the present value of the following cash flow streams under the following conditions:
Year | Cash Flow X | Cash Flow Y |
1 | $900 | $100 |
2 | 700 | 300 |
3 | 500 | 500 |
4 | 300 | 700 |
5 | 100 | 900 |
a. The appropriate discount rate is 9%.
What do you notice comparing PV of the two cash flows?
b. What is the present value of each cash flow stream at a zero percent discount rate?
2.- Wilma wants to buy a car that costs $52,000. She has arranged to borrow the total purchase price of the car from her bank at 6 percent interest rate. The loan requires monthly payments for a period of five years. If the first payment is due in one month after purchasing the car, what will be the amount of Wilmas monthly payment on the loan?
3.- Suppose you invest $8,000 in a mutual fund in one year and $9,500 in two years. If the fund pays 7% annual interest, how much will you have in three years? How much will you have in 7 years if you make no further deposits?
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