Name: Nguyen Xuan Thanh
Class:
Wed. afternoon
Student
ID: 1235735
CHAPTER5
Questions
5.4/ Would you rather have a savings account that pay 5% interest compounded
semiannually or one that pay 5% interest compounded daily? Explain
I would rather have a savings account that pays 5% interest compounded
daily. Because
I would earn more “interest
on interest”.
5.5/ To find the present value of an uneven series of cash flows, you must find the PVs of
the individual cash flows and then sum them. Annuity procedures can never be of use, even
when some of the cash flows constitute an annuity because the entire series is not an
annuity. True or false? Explain.
False. One can find the present
valueof an embedded
annuity and add this PV to the PVs of the
other individual cash flows to determine
to the present
value of the cash flow stream.
Problems
5.3/ FINDING THE REQIURED INTEREST RATE Your parents will retire in 18 years.
They current have %250,000, and they think they will need $1,000,000 at retirement. What
annual interest rate must they earn to reach their goal, assuming they don’t save any
additional funds?
With a financial calculator enter the following: N=18, PV= 250000, FV=1000000 and PMT=0.
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 Spring '11
 Nguyen
 Time Value Of Money, Net Present Value, Mathematical finance

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