How are the present value and the future value of a lump sum related in definition and in terms of mathematics? Notice that for a given interest rate (r) and a given investment time horizon (n), PVFr,n and FVFr,n are inverses of each other. Why?
Answer to relevant QuestionsHow would (a) an increase in the discount rate or (b) a decrease in the time period until the cash flow is received affect the present value? Why? What is perpetuity, and how is its present value conveniently calculated? How do you find the present value of a growing perpetuity? Jason Spector has shopped around for the best interest rates for his investment of $10,000 over the next year. He has found the following: Stated Rate ... Compounding 6.10% ...... Annual 5.90% ....... Semiannual 5.85% ...Why is it important for corporate managers to understand how bonds and stocks are priced? Go to http://www.stockcharts.com/charts/YieldCurve.htm and click on the animated yield-curve graph (be sure JAVA is enabled on your browser). Answer the following questions: a. Is the yield curve typically upward sloping, ...
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