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Unformatted text preview: blem 2.3, Number 6. Hint: Find Anne’s effective annual interest using the cash flow and IRR functionality of your calculator. Put in 0 (zero) for the cash flows at time 1 and
3. Use this interest rate to determine when Frank should make his payment.
Chapter 2, Section 4
12. Malcolm, Kehara, and Xihan enter into a financial arrangement. Under the arrangement,
Malcolm will pay Kehara 1000 today. Kehara will pay 500 to Malcolm at the end of 3 years
as well as 650 to Xihan at the end of 4 years. Finally, Xihan will make a payment of 800 to
Malcolm at the end of 6 years.
Using the bottom line approach, determine the annual return for Malcolm on this transaction.
13. Cong, Erik, and Yifei enter into a financial arrangement. Cong agrees to pay Erik 3000
today. He also agrees to pay Yifei 1000 at the end of one year. At the end of three years,
Yifei will pay Cong 4000. At the end of two years, Erik will pay X to Yifei and 1000 to
Using the bottom line approach, the annual yield rate or interest rate is the same for Cong and
Calculate X .
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This note was uploaded on 10/10/2013 for the course MA 373 taught by Professor Staff during the Fall '08 term at Purdue University.
- Fall '08