Calculate the present worth of the cash flows presented in the following cash flow diagram, with a discount rate of 5%.
Cash Flows
$21
$21
$21
$21
$21
$21
0
1
2
4
5
6
EOY
Which of the following approaches is correct? (Hint: 1.12 = 1.21)
a. P = ($21(P|A 5%,5) + $100 (P|A 5%,3) + $10 (P|G 5%,3))(P|F 5%,1) + $21
b. P = ($21(P|A 5%,5) + $100(P|A 5%,10%,3))(P|F 5%,1) + $21
c. P = $21(P|A 5%,5) + $100 (P|A 5%,3) + $10 (P(G 5%,3) + $21
d. P = $21(P|A 5%,2)(P|F 5%,4) + $121(P|A 5%,3) + $10(P|G 5%,3) + $21
9. Consider the following interest profile as follows:
1st quarter 2nd quarter 3rd quarter 4th quarter
Quarterly Interest 2% 2.5% 2% 2.5%
rate in year
The effective annual interest rate is:
a. 9.0000%
b. 9.3070%
c. 9.3083%
d. None of the above