Question

1.

Find the present value of $725 due in the future under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.

1. 15% nominal rate, semiannual compounding, discounted back 5 years.

   $  

2. 15% nominal rate, quarterly compounding, discounted back 5 years.

   $  

3. 15% nominal rate, monthly compounding, discounted back 1 year.

   $  

2.

1. Find the present values of the following cash flow streams. The appropriate interest rate is 10%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF₀ = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent.

   Year	Cash Stream A	Cash Stream B
   1	$100	$250
   2	400	400
   3	400	400
   4	400	400
   5	250	100

   Stream A: $  

   Stream B: $  

2. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar.

   Stream A $  

   Stream B $  

3.

Find the present value of the following ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press PV, and find the PV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent.

1. $600 per year for 10 years at 8%.

   $   

2. $300 per year for 5 years at 4%.

   $   

3. $600 per year for 5 years at 0%.

   $   

4. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

   Present value of $600 per year for 10 years at 8%: $   

   Present value of $300 per year for 5 years at 4%: $   

   Present value of $600 per year for 5 years at 0%: $   

Answer 1