Question

Please answer K and L

i. What is the present value of the following uneven cash flow stream? The annual interest rate is 496. 04% 100 $300 $300 $50 j. 1. Wll the future value be larger or smaller is we compound an initial amount more often than annually (e-g., semiannually, holding the stated (nominal) rate constant)? Why? 2. Define a. the stated (or quoted or nominal) rate b. the periodic rate C, the effective annual rate (EAR or EFF%) 3, what is the EAR corresponding to a nominal rate of 4% semiannual compounding? Quarterly compounding? k. When will the EAR equal the nominal (quoted) rate? l. 1, what is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) 100 $100 $100 2. What is the PV? 3, what would be wrong with your answer to parts 1(1) and i(2) if you used the nominal rate, 496, rather than the EAR or the periodic rate, INOM/2-496/2-296, to solve the problems? I. Construct an amortization schedule for a $1,000, 4% annual interest loan with three equal installments. 2. What is the annual interest expense for the borrower and the annual interest income for the lender during Year 2? m.

Answer 1