http://zh.sgforums.com/forums/2297/topics/310747 zh-CN 60 <p>1. Ans: 100/(1+0.05) + 100/(1+0.08)^2</p> <p>Work the arithmetic out yourself for the next step. <img src= "/images/emoticons/kde-3.5.8/KMess-Cartoon/wink.png" alt= "wink.png" /></p> <p>2. 5 annual payments of $50 discounted at the interest rate of 10% per annum:</p> <p>Ans: 50/(1+0.1) + ... + 50/(1+0.1)^5</p> <p>Rationale: Investor can use this same sum of money and re-invest it at the same rate of 10%, giving him the same amount of money after 5 years, therefore making him indifferent.</p> <p>Work the arithmetic out yourself for the next step.<img src= "/images/emoticons/kde-3.5.8/KMess-Cartoon/wink.png" alt= "wink.png" /></p> <p>Edit: Typos</p> Thu, 13 Mar 2008 17:33:03 +0800 zh.sgforums.com:2297:310747:7930388 Paradise Lost http://zh.sgforums.com/forums/2297/topics/310747 <p>1. What is the present value of a stream of 2 annual cash flows of $100 beginning in one year time where the interest rate is 5% pa for the first year and 8 %pa for the second year.</p> <p><br /> <br /> 2. Assuming an interest rate of 10%, what is the amount of money a person must be given now so that he is indifferent to receiving a stream of 5 annual payments of $50 each</p> Wed, 12 Mar 2008 22:25:34 +0800 zh.sgforums.com:2297:310747:7928461 thickskin23 http://zh.sgforums.com/forums/2297/topics/310747