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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
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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