Answer 1(a):
PV in year 2 = Year 2 payment + PV at year 2 of year 3 payment + PV at year 2 of year 4 payment+ PV at year 2 of year 5 payment
= 1000 + 1000 / (1+ 7%) + 1000/ (1 + 7%) 2 + 1000 / (1 + 7%) 3
= 3,624.32
PV in year 2 = 3,624.32
Answer 1(b):
PV of cash flows = 4,100.20
Workings:
Answer 2(a):
PV in year 4 = Year 4 payment + PV at year 4 of year 5 payment
= 1000 + 1000 / (1+ 7%)
= 1,934.58
PV in year 4 = 1,934.58
Answer 2(b):
PV of cash flows = 4,100.20
Workings:
Please see workings of answer 1(b) above
Using the following to answer question 1(a) and 1(b) 1(a) What is PV in year 2?...
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