Question

(show work)

2 If you deposit $1,000 now and are promised payments of $500 three years from now and $1,500 five years from now, the equation that will yield the correct rate of return is:

   A)   -1000 = 500(P/F,i,3) + 1500(P/F,i,5)

   B)   0 = 1000 + 500(P/F,i,3) + 1500(P/F,i,5)

   C)   1000 = -500(P/F,i,3) - 1500(P/F,i,5)

   D)   0 = -1000 + 500(P/F,i,3) + 1500(P/F,i,5)

3 For the equation: 5,000 = 1,000(P/F,i,1) - 2,000(P/F,i,2) + 7,000(P/F,i,7) + 7,000(P/F,i,9), the number of possible rate of return values is:

   A)   1

   B)   2

   C)   3

   D)   4

4there is more than one sign change in the net cash flow of a rate of return equation, the possible rate of return values will fall in the range of:

   A)   minus infinity to plus infinity

   B)   minus 100% to plus infinity

   C)   minus 100% to plus 100%

   D)   minus infinity to plus 100%

5 When multiple rate of return values are possible for a rate of return equation, one way to come up with a single value which satisfies the equation is:

   A)   Solve for the internal rate of return

   B)   Use the project net investment procedure

   C)   Eliminate all rate of return values above 100%

   D)   Eliminate all rate of return values below 0%

Answer 1

1. correct answer is
A) 0= -1000 + 500(p/f,i,3)+1500 ( p/F,i,5)

2.The number of possible rate return value is: c ) 3
Because more than 1 sign changes on net cash flows
Cash flow 0 = -
Cash Flow 1 = +
Cash Flow 2 = -
Cash flow 3 = +
Cash flow 4 = +

4. there is more than one sign change in the net cash flow of a rate of return equation, the possible rate of return values will fall in the range of

: B)   minus 100% to plus infinity,

5. When multiple rate of return values are possible for a rate of return equation, one way to come up with a single value which satisfies the equation is:

C)   Eliminate all rate of return values above 100%