Homework #3D (FV of mixed stream) Question 1     You are given an investment to analyze

Homework #3D (FV of mixed stream)

You are given an investment to analyze. The cash flows from this investment are

End of year

1. $2,962
2. $2,766
3. $553
4. $2,076
5. $1,046

What is the future value of this investment at the end of year five if 10.23 percent per year is the appropriate interest (discount) rate?

You have just purchased an investment that generates the cash flows shown below for the next four years. You are able reinvest these cash flows at 8.56 percent, compounded annually. How much is this investment worth at the end of year four?

End of year

1. $299
2. $1,028
3. $341
4. $245

You have been offered the opportunity to invest in a project that will pay $2,332 per year at the end of years one through three and $9,402 per year at the end of years four and five. These cash flows will be placed in a saving account that pays 12.43 percent per year. What is the future value of this cash flow pattern at the end of year five?

Homework #3E (Perpetuity, EAR, RRR)

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What is the present value of a $782 perpetuity discounted back to the present at 4.59 percent.

You plan to apply for a loan from Bank of America. The nominal annual interest rate for this loan is 7.59 percent, compounded daily (with a 365-day year). What is the effective annual rate, or EAR (annual percentage yield), of this loan?

You are considering an investment that has a nominal annual interest rate of 6.67 percent, compounded semiannually. Therefore, the effective annual rate, or EAR (annual percentage yield) is _____.

Assume that the inflation rate during the last year was 1.00 percent. US government T-bills had the nominal rates of return of 5.95 percent. What is the real rate of return for a T-bill?

Large-cap stocks had the nominal rates of return of 13.32 percent. The rate of inflation during the last year was 1.12 percent. What is the real rate of return for large-cap stocks?