HW3 - Solutions - option to the first. e) lUI 'vvg tJV1 so....

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3d. Yes, these values are consistent with our knowledge ofPDV. The PDV of the second option is lower than the first because it allows larger payments in the future. In discounting the larger future payments more heavily, it causes the total PDV of the loan to be lower than the PDV of the first option. Therefore, you should prefer the second
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Unformatted text preview: option to the first. e) lUI 'vvg tJV1 so. VV'-e e (6 vlt~1 urVl-C H t l ~ r j I = r f 1l e r-t! hf'V j fH) d~~ 1 : !:,-% :: r' -t J ~!G y :, ;J lu 0 r-0, 0 2. V-l .-") to' 0 J11 DOG ( ~ ) PDV : '"'" ~ ,00 ~ ~ /}oo ( -'-) f " (( /1\ 3 , 1 0). . , " u,l.) S-q 1/ lflf-l- /4-...
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HW3 - Solutions - option to the first. e) lUI 'vvg tJV1 so....

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