Question

You are offered an investment with a quoted annual interest rate of 11% with weekly compounding of interest. What is your effective annual interest rate?

	10.71%
	11.36%
	11.61%
	12.00%
	11.00%

You are valuing an investment that will pay you nothing the first two years, $21,000 the third year, $23,000 the fourth year, $27,000 the fifth year, and $33,000 the sixth year (all payments are at the end of each year). What is the value of the investment to you now if the appropriate annual discount rate is 15.00%?

	$42,511.26
	$54,648.75
	$104,000.15
	$82,630.99
	$115,772.97

Answer 1

Ans 1) 11.61%

EAR =	( 1 + r )^n - 1
	Compounded Weekly
EAR=	( 1 + 11%/52)^52 - 1
EAR=	11.61%

Ans 2) $54,648.75

Year	Project Cash Flows (i)	DF@ 15%	DF@ 15% (ii)	PV of Project ( (i) * (ii) )
1	0	1/((1+15%)^1)	0.870	-
2	0	1/((1+15%)^2)	0.756	-
3	21000	1/((1+15%)^3)	0.658	13,807.84
4	23000	1/((1+15%)^4)	0.572	13,150.32
5	27000	1/((1+15%)^5)	0.497	13,423.77
6	33000	1/((1+15%)^5)	0.432	14,266.81
		PV		54,648.75