Homework Week 1

1)- d. time lines can be constructed to deal situations where some of the cash flows occur
annually, but others occur quarterly.
2) - c. The discount rates, it the discount rate the investment will lower in the long run.
The discount rate is the interest rate on the investment, the higher it the better the investment will
genera 9368.0tes higher return on investment. For instance at 2.2% rate Pv= 10,000(1+2.2%)^3= $9368.009 if the discount rate decrease from 2.2 to 1.2 % pv =10,000(1+1.2%)^-3= 939.14
3) - d. The cash flows for an annuity due must all occur at the ends of the periods
4)- d . The periodic rate of interest is 1.25% and the effective rate is greater than 5% .For
quarterly calculation 5%/4= 1.25 %
5- d. the proportion of each payment represents interest as opposed to repayment of the
principal would be lower if the interest rate were lower.