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Unformatted text preview: lated as shown on the following Excel spreadsheet. Paying about $1,905 would provide exactly a 9% return. Frey should pay no more than that amount for the opportunity to receive these cash flows. Review Question 4–11 How is the future value of a mixed stream of cash flows calculated? How is the present value of a mixed stream of cash flows calculated? LG5 Compounding Interest More Frequently Than Annually Interest is often compounded more frequently than once a year. Savings institutions compound interest semiannually, quarterly, monthly, weekly, daily, or even continuously. This section discusses various issues and techniques related to these more frequent compounding intervals. Semiannual Compounding semiannual compounding Compounding of interest over two periods within the year. Semiannual compounding of interest involves two compounding periods within the year. Instead of the stated interest rate being paid once a year, one-half of the stated interest rate is paid twice a year. EXA...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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