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a. Suppose you purchase an asset on September 1, 2009 that pays 5000 YTL on August 31, 2014. Assume that the interest rate for the first two years of the asset's life is 7% while during the final three years it is 6%. find out the present value of the asset on September 1, 2009. You may assume that interest is compounded annually.

b. Using the same interest payments as in part a. rework the problem except assume that you will receive five annual payments of 1000 YTL over the period. Which security has a higher present value? find out and describe intuitively as well

Microeconomics, Economics

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