3. If the net present value for each of the cash flows were calculated at a 10% interest rate, the net present value cash flow at the end of five years would be: A. Greater than the total cash flow without the net present value applied B. Less than the total cash flow without the net present value applied C. The same as the total cash flow without the net present value applied D. Unable to be calculated with the information supplied

3. If the net present value for each of the cash flows were calculated at a 10% interest rate, the net present value cash flow at the end of five years would be: A. Greater than the total cash flow without the net present value applied B. Less than the total cash flow without the net present value applied C. The same as the total cash flow without the net present value applied D. Unable to be calculated with the information supplied

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 1CQQ

See similar textbooks

Similar questions

Economics In 54 months time you expect a cash flow of $3 million. Calculate it’s present value (PV) given the 54-month interest rate is currently 4%, with a volatility of 120 basis points (bps). Explain, using equations with properly-defined mathematical notation, how to map this cash flow to vertices at 4 years and 5 years, in such a way that the volatility of the present value of the mapped cash flow remains at 120 bps. Suppose the 4-year rate has a volatility of 110 bps and the 5-year rate has a volatility of 150 bps, and their correlation is 0.9. How much should be mapped to each vertex. Give your answer in PV terms and round your answers to whole $ values.
2. Assume a bond with the following characteristics: face value = $1000; maturity = 5 years; N yearly coupon payments = $100. a. If the current price of this bond is $850, state what the formula is to calculate the bond's yield to maturity and state the range of interest rates where the yield to maturity should fall b. If you purchased this bond at face value and held it for 1 year, when you resold it for $850, what is the bond's rate of return?
a) Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest rate is 6 percent. What is the future value of the $350 after 4 years? b) Suppose you are deciding whether to buy a particular bond from your local municipality. If you buy the bond and hold it for 4 years, then at that time you will receive a payment of $10,000. Assume the interest rateis6percent. Underwhatcircumstanceswillyoubuythebond?Meaninguptowhatpriceareyou willing to pay.
What is the present value of $1.21 received at the end of two years if the interest rate is 10% and compounding is annual? a- 1.31 b- 1.21 c- 1.10 d- 1.00 Which of the following is a leading economic indicator? a- average prime interest rate charged by banks b- stock prices, 500 common stocks c- commercial and industrial loans outstanding d- industrial production
H6. a. what is the present value of a two year income stream $10,000 in year 1 and $10,000 in year 2 assuming a 5% interest rate (assuming one gets paid at the end of the year) b. what is the present value of a $10,000 income stream obtained in every throughout one's life?
9. In how many years will $1,500 yield an interest of 5200 at 2% simple interest?
Example 2: EOY NCF ($) 1 100 2 90 3 80 4 70 find the present value at 10% interest of the series of payments given in Example 2.
Suppose you are considering working at a local coffee shop 5nights a week. You expect to save $125 a month from the jobafter meeting all your expenses. To be eligible for the job youmust undergo a week’s work training at the coffee shop.Assume the training costs you $100.Suppose you plan to workthe next 9 months there and you can borrow and lend moneyat an annual rate of 6% compounded monthly.What is the net present value of this work to you?
SUBJECT: ENGINEERING ECONOMICS By condition of a will, the sum of P 2,000 is left to a girl to be held in trust fund by her guardian until it amounts to P 50,000. When will the girl received the money if the fund is invested at 8% compounded quarterly? When will the amount be tripled with an interest of 11.56%? A man borrowed P 1,000,000 at interest rate of 12% per annum compounded quarterly. What is the effective rate?
1. A present obligation of $20,000 is to be repaid in equal uniform annual amounts, each of which includes repayment of the debt (principal) and interest on the debt, over a period of 5 years. If the interest per year is 10%, what is the amount of the annual repayment? 2. Suppose that the $20,000 above is to be paid at a rate of $4,000 per year plus the interest that is owed and based on the beginning of year unpaid principal. Compute the total amount of interest repaid in this situation and compare it with that of the problem above. Why are the 2 amounts different? Solve all questions compulsory....
Suppose that you purchase a 2 year coupon bond at the time it is issued for $1100. The face value of the bond is $1000, with annual coupon payments of $80. a. What is the bond’s “coupon rate”? b. What is the bond’s “current yield”? c. What is the bond’s (nominal) “yield to maturity”? d. If you hold the bond for 1 year and sell it for $1035 (after collecting the first coupon payment), what is your “holding period rate of return”? Please answer all part otherwise Dounvote
# 5- According to the cash flow diagram below, for the case where the cost of capital is 25%; Calculate the present (P), the end of the 5th year (F) and the annual equivalent (A) value of money