QUESTION 2

a)What is the difference between future value and present value? Which approach is generally preferred by financial managers? Why?

b)Define and differentiate among three basic patterns of cash flow:

) a single amount2) an annuity, and 3) a mixed stream

c)What is the difference between an ordinary annuity and an annuity due? Which is more valuable? Why?

You can deposit RM10,000 into an account paying 9% annual interest either today or exactly 10 years from today. How much better off will you be at the end of 40 years if you decide to makeinitial deposit rather than 10 years from today?

d)Planters Bank pays 5 percent simple interest on its savings account balances, whereas Centura Bank pays 5 percent compounded annually. If you made a RM12,000 deposit in each bank, how much more money would you earn from your Centura Bank account at the end of 20 years?

e)Rania borrowed RM15,000 at a 14% annual interest rate to be repaid over three years. The loan is amortized into three equal annual end of year payments

i.Calculate the annual end-of-year loan payment

ii.make a loan amortization schedule showing the interest and principal breakdown of each of three loan payments.