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Unformatted text preview: en the future value of this timeline is closest to: A) $666 B) $500 C) $605 D) $650 onsider the following timeline:
C If the current market rate of interest is 12%, then the value of the cash flows in year 0 and year 2 as of year 1 is closest to: A) $2120 B) $2013 C) $2000 D) $1893 Answer: B
Explanation: A) B) This is a two part problem involving both present and future values.
FV of year 0 c/f = FV = PV(1 + r)n = 1000(1.12)1 = $1120
PV of year 2 c/f = PV = FV/(1 + r)n = 1000/(1.12)1 = $893
So the answer is $1120 + $893 = $2013 C) D) 7) Consider the following timeline: If the current market rate of interest is 7%, then the future value of this timeline as of year 3 is closest to: A) $1720 B) $1500 C) $1404 D) $1717 8) Consider the following timeline: If the current market rate of interest is 9%, then the present value of this timeline as of year 0 is closest to: A) $492 B) $637 C) $600 D) $400 9) Consider the following timeline: If the current market rate of interest is 8%, then the value as of year 1 is closest to: A) $0 B) $1003 C) $540...
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This note was uploaded on 11/27/2013 for the course FINA 5170 taught by Professor Staff during the Fall '08 term at North Texas.
 Fall '08
 staff
 Finance

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