Karandeep singh

Sink241199
1.What makes an investment decision a good one?
a decision is useful for the association's financial backers on the
off chance that it expands the association's worth by giving
advantages whose worth surpasses the expenses. it is critical to
have a market concentrate set up and be sure about the
destinations that the organization needs to meet. Moreover,
there are some rules that help to make good investment
decision are Value of principle, which demonstrates how to use
market information to evaluate costs and benefits and Law of
One Price, which explains why market prices are so important.
2.How important are our personal preferences in valuing an
investment decision?
As an ordinary piece of life, we as a whole settle on decisions
that compromise advantages and expenses across time. Going
to college, buying this book, taking out a vehicle advance or
home credit, purchasing portions of stock, and choosing
occupation and much more but, our personal preferences and
our assessment of the reasonable cost are unessential in
assessing the worth of the chances.
3.Is the value today of money to be received in one year higher
when interest rates are high or when interest rates are low
The value today is higher when the interest rates are low
because present value is indirectly proportional to interest rate
4.What do you need to know to compute a cash flow’s present
or future value?
For computing the cash flow at different points in time are:
• a) Comparing and Combining Values-It is simply
conceivable to analyze or join esteems at a similar point on
schedule
• b) Compounding- To ascertain an income's future worth,
should compound it
• c) Discounting- To figure the worth of a future income at a
prior point on schedule, should discount it
PP4 questions
How do you calculate the present value of a cash flow stream?
To calculate the present value of a cash flow stream is sum of
the present values of each cash flow.

C1 C2 Cn
PV0  C0    ... 
(1  r ) (1  r ) 2
(1  r ) n
What is the intuition behind the fact that an infinite stream of
cash flows has a finite present value?
The underlying store will continue to acquire revenue, this gives
the infinite cash streams.
What are some examples of annuities?
Lottery winning paid out over time, monthly home mortgage
payments, monthly insurance payments and car payments.
What is the difference between an annuity and a perpetuity?
Perpetuity is a bundle of finite cash flows
Annuity is finite cash flows
What is an example of a growing perpetuity?
Any stream of installments where you need the sum to develop
by the pace of swelling so buying power stays as before for
example, if we expect to receive $100 every year forever, this is
considered a perpetuity.
How do you calculate the cash flow of an annuity?
A standard annuity is one in which the installments or receipts
happen toward the finish of every period.

How do you calculate the rate of return on an investment?

Rate of return=[Initial value(Current value−Initial value)]×100