Investment X offers to pay you $5,800 per year for eight years, whereas Investment Y offers to pay you $7,900 per year for five years. Use Appendix D. (Round "PV Factor" to 3 decimal places. Round the final answers to 2 decimal places.) Calculate the present value for Investment X and Y If the discount rate is 5%. Investment X Investment Y Present value Investment X Investment Y $ $ Calculate the present value for Investment X and Y If the discount rate is 15%. Present value $ $

Investment X offers to pay you $5,800 per year for eight years, whereas Investment Y offers to pay you $7,900 per year for five years. Use Appendix D. (Round "PV Factor" to 3 decimal places. Round the final answers to 2 decimal places.) Calculate the present value for Investment X and Y If the discount rate is 5%. Investment X Investment Y Present value Investment X Investment Y $ $ Calculate the present value for Investment X and Y If the discount rate is 15%. Present value $ $

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 37QA

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Task: Assume that at time 0 a sum L is lent for a series of n yearly payments. The rth payment, of amount x, is due at the end of the rth year. Let the effective annual interest rate for the rth year be i,. Give an identity which expresses L in terms of the x, and i,. Answer: The identity is [ Select ] [ Select ] L = x_1 (1+i_1)^(-1) + x_2 (1+i_1)^(-1) (1+i_2)^(-2) + .. + x_n (1+i_1)^(-1) (1+i_2)^(-2) ... (1+i_n)^(-n) L = x_1 (1+i_1) + x_2 (1+i_1) (1+i_2) + ... + x_n (1+i_1) (1+i_2) ... (1+i_n) L = x_1 (1+i_1)^(-1) + x_2 (1+i_1)^(-1) (1+i_2)^(-1) + .. + x_n (1+i_1)^(-1) (1+i_2)^(-1) ... (1+i_n)^(-1) Question 3 L = x_1 (1+i_1) + x_2 (1+i_1) (1+i_2)^2 + ... + x_n (1+i_1) (1+i_2)^2 ... (1+i_n)^n