Reference no: EM132453919
Gradient Series and Effective interest rates.
Question 1. Given the cash flows below, drawing the cash flow diagram, determine the future worth @ an interest rate of 8% compounded annually.Answer: FW = $28,869.76
Year 1 2 3 4
Cash Flow in $ -5K -6K -7K -8K
Question 2. Determine the PW of the cash flows given in table below for an interest rate of 18%. Show the cash flow diagram. Answer: PW = $172.48
Year 0 1 2 3 4 5 6 7 8 9 10
Cash Flow in $ 100 80 60 40 20 0 -20 -40 -60 -80 -100
Question 3. Acument Global Technologies is exploring investment opportunities for $10 M. The company would like to maximize the return on this investment. Four investment opportunities being explored are for a period of 10 years. Help the company choose the best investment opportunity.
a. 10% compounded quarterly. F= $26,850,000
b. 9.85% compounded daily. F= $26,774,561
c. 9.95% compounded monthly. F=$26,936,511
Question 4. A loan of 10,000 is to be repaid a nominal interest rate of 12% year.
Determine,
a. the effective interest rate if loan is paid back every six months. 12.36%
b. the effective interest rate if loan is paid back every three months.12.55%
c. the effective interest rate if loan is paid backevery month.12.68%
d. the effective interest rate if loan is paid back biweekly 12.72%
e. the. effective interest rate if loan is paid back every week.12.73%
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