Week 3 Homework Fin 6000

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Week 3 Assignment 1
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1. Calculating the Number of Periods
At 8 percent interest, how long does it take to double your money? To quadruple it?

FV = PV (FVF) 8%, t = ?
$2 = $1 (FVF) 8%, t = ?
$2/ 1 = 2.0; so for FVF at 8 %, “t” is approximately 9 years.

2. Perpetuities
An investor purchasing a British consul is entitled to receive annual payments from the British government forever. What is the price of a consul that pays $160 annually if the next payment occurs one year from today? The market interest rate is 4.5 percent.

PV = C / r
PV = $160 / 0.045
PV = $3,555.56

3. Present Value and Multiple Cash Flows
Investment X offers to pay you $6,000 per year for nine
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$ 22,943.17 | $ 25,008.05 | 3 | $ 25,008.05 | $ 27,258.78 | $ 2,250.72 | $ 25,008.05 | $ - | | | | $ 12,776.33 | |

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