Chapter 5, Problem 24P

a.

Summary Introduction

To compute: Present value of $500 at 12% nominal rate semiannual compounding, discounted back 5 years.

Present Value of Cash Flow:

It is also called as discounted value; it defines that amount of money that is invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.

b.

Summary Introduction

To compute: Present value of $500 at 12% nominal rate, quarterly compounding, and discounted back 5years.

Present Value of Cash Flow:

It is also called as discounted value; it defines that amount of money thatis invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.

c.

Summary Introduction

To compute: Present value of $500 at 12% nominal rate , monthly compounding, discounted back 1year.

Present Value of Cash Flow:

It is also called as discounted value; it defines that amount of money thatis invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.

d.

Summary Introduction

To explain: Reason of difference in present value of part a andb.

Present Value of Cash Flow:

It is also called as discounted value; it defines that amount of money that is invested at a given rate of interest will increases to the amount of future cash flow at that particular time in the future.