Finance problem: time value of money.
Not what you're looking for?
Which would you prefer?
a) An investment paying interest of 12% compounded annually.
b) An investment paying interest of 11.7% compounded semiannually.
c) An investment paying 11.5% compounded continuously.
Work out the value of each of these investment after 1,5, and 20 years.
2.You own a pipeline which will generate a $2 million cash return over the coming year. The pipeline's operating costs are negligible, and it is expected to last for a very long time. Unfortunately, the volume of oil shipped is declining, and cash flows are expected to decline by 4% per year. The discount rate is 10%.
a. What is the PV of the pipeline's cash flows if its cash flows are assumed to last forever?
b. What is the PV of the cash flows if the pipelines is scrapped after 20 years?
3. A 10-year German government bond (bund) has a face value of 100 and an annual coupon rate of 5%. Assume that the interest rate (in euros) is equal to 6% per year. What is the bond's PV?
4. Look again at problem 3. Suppose that the German bund paid interest semiannually like a U.S. bond. ( The bond would pay .025x100= 2.5 every six months). What's the PV in this case?
Purchase this Solution
Solution Summary
The problem set deals with concepts in finance including time value of money concept.
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
Recent Feedback
- "Thank you."
- "thank you Chidi Ngene.. if you have any APA references would be great"
- "Thank you so much for your help, your explanations were easy to understand and apply!"
- "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
- "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution
Free BrainMass Quizzes
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media