F370 Homework #2
Opens:
Sept 9
th
at 3pm
Closes:
Sunday
Sept 12
th
at 11:55pm
1
.
A perpetuity has an annual payment level of $43 and a discount rate of 12%. A
separate perpetuity is the same, except that it’s cash flows grow at a rate of 4% per
year. To the nearest dollar, what is difference between the present values of the two
perpetuities?
A. $167.43
B. $179.17
C. $200.39
D. $164.64
7.9%
2. The second flow is smudged in the following uneven stream whose discount rate
is 9%. If
the full stream has a present value of $1,773.42, then to the nearest
dollar, what is
the number that was smudged out? Do not use a trialanderror
approach.
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3.
If you used your
calculator’s programmed TVM keys
in problem #2, then,
what two different timevalueofmoney perspectives did you use for the two TVM
steps
needed to get your final answer?
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 Spring '10
 Tom
 Time Value Of Money, Net Present Value, Perpetuity, Mathematical finance

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