FINC330-02 (Pop Quiz 2; Sep 25) Name 1. TrueFalse (Explain) Effect.docx - FINC330-02(Pop Quiz 2 Sep 25 Name 1 True/False(Explain Effective interest

FINC330-02 (Pop Quiz 2; Sep 25) Name 1. TrueFalse (Explain) Effect.docx

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FINC330-02 (Pop Quiz 2; Sep 25) Name: 1. True/False (Explain): Effective interest rate is always higher than the corresponding nominal interest rate. 2. Which of the following cash flow stream would you choose? Which one would be your last choice? Why? (make sure that your decision makes financial sense) Period 3 Option 1 1000 1000 2000 4000 Option 2 2000 2000 2000 2000 Option 3 4000 2000 1000 1000 Option 4 6000 2000 3. What sum of money now is equivalent to $8250 four years later, if interest rate is 4% per 6- month period? 4. What's the rate of return you would earn if you paid $950
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Unformatted text preview: for a perpetuity that pays $85 per les es una ma olen po would sam tvou pa se ne perpetuty inat . year? 5. Gandalf is buying a new magic staff. He can pay (option 1) $11,000 up front, or he can pay (option 2) $1,000 up front and pay $4000, $3000, $2500, $1500 and $1580.70 over next five years respectively. Although he is a master magician, he does not know much about finance. Now he is asking you to recommend him a payment option. Gandalf's opportunity cost is 10%....
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