Cash flow stream Essay

?1. What is the present value of the chase uneven cash flow stream ?$50, $100, $75, and $50 at the arrest of Years 0 through 3? The appropriate interest prize is 10%, compounded yearlyly. PV=190.46 (SEE EXCEL shoot down ATTACHED)2. We sometimes need to capture out how long it will take a sum of notes (or something else, such as earnings, population, or prices) to grow to some specified amount. For example, if a companys sales are growing at a rove of 20% per year, how long will it take sales to triplex? It would take about 3.801784 years before the sales double. (SEE EXCEL buck ATTACHED)3. Will the future value be larger or little if we compound an initial amount more than often than annually for example, every(prenominal) 6 months, or semiannuallyholding the stated interest charge per unit constant? Why? It will be larger because its essentially 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 daily? EAR = (1 + Nominal pursuit/Number of Period) Number of Period -1 SEMI ANNUALLY= (1+.12/2)2-1=12.36%QUARTERLY= (1+.12/4)4-1=12.55% periodic= (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 account that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How a good deal 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 wedge expound above if, just after it had been issued, the expected inflation rate pink wine by 3 percentage points, causing investors to require a 13% render? Would we now have a discount or a premium bond? PV= $837.21 (SEE EXCEL FILE ATTACHED)It would be considered a discounted bond because the present value is less than its face value.7. What 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 turn back 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 read 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 total return, the current yield, and the peachy gains yield for the discount bond in Question 8 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does not 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%