I. 1. What is the value at the end of Year 3 of the following cash...
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I. 1. What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) 0 0 2. What is the PV? 2 $100 4 $100 6 $100 3. What would be wrong with your answer to parts I(1) and (2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, INOM/2=4% / 2 = 2%, to solve the problems? I. 1. What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) 0 0 2. What is the PV? 2 $100 4 $100 6 $100 3. What would be wrong with your answer to parts I(1) and (2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, INOM/2=4% / 2 = 2%, to solve the problems?
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