Cash flow stream Essay

?1. What is the present value of the following uneven cash flow stream ?$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate beguile wander is 10%, intensify annually. PV=190.46 (SEE EXCEL single file ATTACHED)2. We sometimes need to find out how long it testament cause a sum of money (or something else, such as earnings, population, or prices) to fester to some specified amount. For example, if a companys sales atomic number 18 growing at a rate of 20% per year, how long will it take sales to double? It would take about 3.801784 years sooner the sales double. (SEE EXCEL commove ATTACHED)3. Will the future value be larger or smaller if we compound an initial amount to a greater extent often than annually for example, every 6 months, or semiannually holding the stated interest rate constant? Why? It will be larger because its basically like adding on interest on top of interest as the frequency increases.4. What is the effective annual rate (EAR or EFF %) for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded insouciant? EAR = (1 + Nominal Interest/Number of Period) Number of Period -1 trucking rig ANNUALLY= (1+.12/2)2-1=12.36%QUARTERLY= (1+.12/4)4-1=12.55%MONTHLY= (1+.12/12)12-1=12.68%DAILY= (1+.12/365)365-1=12.75%5. Suppose that on January 1 you deposit $100 in an bank bill that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later? OCT 1ST= 100*(1+.1133463/365) (365*.75) = $108.876. What would be the value of the confiscate described above if, just after it had been issued, the expect inflation rate rose by 3 percentage points, create investors to require a 13% return? Would we now have a usher out or a premium draw? PV= $837.21 (SEE EXCEL FILE ATTACHED)It would be considered a discounted trammel net because the present value is less than its fountain value.7. W hat would happen to the bonds value if inflation fell and rd declined to 7%? Would we now have a premium or a discount bond? PV= $1210.71 (SEE EXCEL FILE ATTACHED) It would be considered a premium bond because the present value is more than the face value.8. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you about the relationship between rd and the bonds coupon rate? RATE = 11% for a bond that sells for $887 and the RATE = 7% for a bond selling for $1134.209. What are the kernel return, the current yield, and the capital gains yield for the discount bond in headway 8 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does non default on the bond.) The return for the $887 bond is 11% and the yield is 90/887 which equals 10.15%. The capital gain would be 11% 10.15%= .85% The return for the $1134.20 bond is 7% and the yield is 90/1134.20 which equals 7.9%. The capital gain would be 7% 7.9%= -.9%