1. What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) 0 ㅏ 0 2 4 + + + + $100 $100 6 $100 2. What is the PV? 3. What would be wrong with your answer to parts I(1) and (2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, INOM/2 = 4% / 2 = 2%, to solve the problems?
1. What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) 0 ㅏ 0 2 4 + + + + $100 $100 6 $100 2. What is the PV? 3. What would be wrong with your answer to parts I(1) and (2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, INOM/2 = 4% / 2 = 2%, to solve the problems?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 12MC: (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest...
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Please answer this question: What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) What is the PV? What would be wrong with your answer to parts I(1) and I(2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, I sow /2=4%/2=2%, to solve the problems?
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