Name: Nguyen Thi Lan Thanh
Class: Friday Morning
Student ID: 1236311
CHAPTER3
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 value of 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?
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 Spring '11
 Nguyen
 Time Value Of Money, Net Present Value, Mathematical finance

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