Question

5 pts Question 18 An investment promises the following cash flow stream: $1,000 at Time 0; $2,000 at the end of Year 1 (or att = 1); $3,000 at the end of Year 2:; and $5,000 at the end of Year 3. At a discount rate of 6.5 %, what is the present value of the cash flow stream? Your answer should be between 8343.00 and 11,000.00, rounded to 2 decimal places, with no special characters Question 19 5 pts Consider a 30-year, $115,000 fixed-rate mortgage with a nominal annual rate of 5.35 percent. All payments are made at the end of each month. What is the remaining balance on the mortgage after 5 years? Your answer should be between 98,478 and 112,670, rounded to 2 decimal places, with no special characters.

Answer 1

18

Inv.
Discount rate	0.065
Year	0	1	2	3
Cash flow stream	1000	2000	3000	5000
Discounting factor	1	1.065	1.134225	1.20795
Discounted cash flows project	1000	1877.934	2644.978	4139.245
NPV = Sum of discounted cash flows
NPV Inv. =	9662.16
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

19

- (1 i) 1 PVordinary Annuity

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

115000= Cash Flow*((1-(1+ 5.35/1200)^(-30*12))/(5.35/1200))

Cash Flow = 642.18

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

PV= 642.17575*((1-(1+ 5.35/1200)^(-25*12))/(5.35/1200))

PV = 106116.35 = remaining balance after one year