If you are calculating the present value of this cash flow under semiannual (twice per year) compounding, you would enter for N and for I/Y into your financial calculator. Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of approximately $ with semiannual compounding. If you are calculating the present value of this cash flow under quarterly (four times per year) compounding, you would enter for N and for I/Y into your financial calculator.
If you are calculating the present value of this cash flow under semiannual (twice per year) compounding, you would enter for N and for I/Y into your financial calculator. Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of approximately $ with semiannual compounding. If you are calculating the present value of this cash flow under quarterly (four times per year) compounding, you would enter for N and for I/Y into your financial calculator.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:Consider a future value of $3,000, 5 years in the future. Assume that the nominal interest rate is 9.00%.
If you are calculating the present value of this cash flow under semiannual (twice per year) compounding, you would enter
for N and
for I/Y into your financial calculator.
Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of
approximately $
with semiannual compounding.
If you are calculating the present value of this cash flow under quarterly (four times per year) compounding, you would enter
for N and
for I/Y into your financial calculator.
Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of
approximately $
with quarterly compounding.
Suppose now that the cash flow of $3,000 only 1 year in the future.
If you are calculating the present value of this cash flow under quarterly (12 times per year) compounding, you would enter
for N and
for I/Y into your financial calculator.
Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of
approximately $
with monthly compounding.
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