PS_Chapter04

# Fvofyear0cffvpv1rn100011211120

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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.

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