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1) Let the uneven cash flow stream:

Year  Cash Flow
  0     $2,000
  1       2,000
  2          0
  3       1,500
  4       2,500
  5       4,000

a) Compute present (Year 0) value of cash flow stream if opportunity cost rate is= 10%?

b) Determine the value of cash flow stream at the ending of Year five if cash flows are invested in account which pays 10% annually?

c) What cash flow today (Year 0), instead of $2,000 cash flow, would be required to accrue $20,000 at the ending of Year five? (Suppose that cash flows for Years one through five remain same.)

2) You can buy a T-bill that is 95 days from maturity for= $9,965. The T-bill has the face value of $10,000. (LG 5-2)

a) Compute T-bill’s quoted yield.

b) Compute T-bill’s bond equivalent yield.

c) Compute T-bill’s EAR.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915107

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