Question

Calculate the present value of the following amounts assuming that the cash flow is received at the end of each specified period: 211

Situation	Cash Flow	Discount rate	End of period( pear year)	Frequency
A	$15,000	10%	8	Bimonthly
B	$20,000	13%	12	Semiannual
C	$6,000	9%	10	Quarterly
D	$50,000	7%	50	Annual
E	$8,500	7%	15	Quarterly

I appreciate if you can explain me step by step. Thank you.

Answer 1

Situation A;

Assuming cash flow obtained at end of 8 year; period per year=6 (bimonthly)

Discount rate=10% ; Bimonthly=10%/6 = 1.67% ; no of terms= 8 years* 6 =48

Present Value= 15000/(1+1.67%)^48 =6784.5

Situation B;

Assuming cash flow obtained at end of 12 year; period per year=2

Discount rate=13% ; Semi annual=13%/2 = 6.5% ; no of terms= 12 years* 2 =24

Present Value= 20000/(1+6.5%)^24 =4412

Situation C;

Assuming cash flow obtained at end of 10 year; period per year=4

Discount rate=9% ; Quarterly=9%/4 = 2.25% ; no of terms= 10 years* 4 =40

Present Value= 6000/(1+2.25%)^40 =2463.87

Situation D;

Assuming cash flow obtained at end of 50 year; period per year=1

Discount rate=7% ; Annual=7% ; no of terms= 50 years

Present Value= 50000/(1+7%)^50 =1697.4

Situation E;

Assuming cash flow obtained at end of 15 year; period per year=4

Discount rate=7% ; Quarterly=7%/4 = 1.75% ; no of terms= 15 years* 4 =60

Present Value= 8500/(1+1.75%)^60 =3001.6