Answered

Discover the best answers at Westonci.ca, where experts share their insights and knowledge with you. Discover detailed solutions to your questions from a wide network of experts on our comprehensive Q&A platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

At a nominal interest rate of i convertible semi-annually, an investment of 1000 immediately and 1500 at the end of the first year will accumulate to 2000 at the end of the second year. Under the same interest rate, what is the present value of 1000 paid at the end of the fifth year?

Sagot :

Answer:

The answer is "869.76"

Explanation:

Given value:

[tex]CF_0=-1000\\\\CF_1=-1500\\\\CF_2=2000\\\\CPT \ IRR =2.8342\%\\\\[/tex]

[tex]\to Nominal\ Rate =2\times ((1+2.8342 \%)^{((\frac{1}{2})-1)}[/tex]

                          [tex]=2\times ((1.28342)^{(\frac{1}{2})-1}) \\ \\=2\times ((1.28342)^{(\frac{1}{2})-1}) \\\\ = 2.81\%[/tex]

[tex]\to 1000 = P (1+ \frac{2.83}{100})^5 \\\\\to 1000 = P (1+ 0.0283)^5\\\\\to P = \frac{1000}{(1+ 0.0283)^5}\\\\[/tex]

       [tex]= \frac{1000}{1.14973878}\\\\= 869.76[/tex]

We hope our answers were helpful. Return anytime for more information and answers to any other questions you may have. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Discover more at Westonci.ca. Return for the latest expert answers and updates on various topics.