Problem 8.What is the equivalent worth in year 5 of the following series of income and disbursements, if the interest rate is 10% per year?YearIncome, S001-560006-860009-148000Answer:Equation:CFD:Expense, S9000600030005000

Equivalent worth is the value based on the time value of money which is equivalent to all expenses…

8. What is the equivalent worth in year 5 of the following series of income and disbursements, if the interest rate is 10% per year? Income, S 0 6000 6000 8000 Answer: Equation: Year 0 1-5 6-8 9-14 CFD: Expense, S 9000 6000 3000 5000

8. What is the equivalent worth in year 5 of the following series of income and disbursements, if the interest rate is 10% per year? Income, S 0 6000 6000 8000 Answer: Equation: Year 0 1-5 6-8 9-14 CFD: Expense, S 9000 6000 3000 5000

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 15PROB

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Question

Problem 8.
What is the equivalent worth in year 5 of the following series of income and disbursements, if the interest rate is 10% per year?
Year
Income, S
0
0
1-5
6000
6-8
6000
9-14
8000
Answer:
Equation:
CFD:
Expense, S
9000
6000
3000
5000

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(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?