Question: Consider the following infinite series of cash flows, of which alternate cash flows of $9 and $5 take place between t-2 and t-26. All

Consider the following infinite series of cash flows, of which alternate cash

Consider the following infinite series of cash flows, of which alternate cash flows of $9 and $5 take place between t-2 and t-26. All other cash flows, including those at t 0, t-1 and from t-27 onwards are $5 per year (with the only except of Year 47, at which the cash flow is $1). Time(yr.) 0 1 2 3 4 5 ... 25 26 27 28 .. 45 46 47 48 49 ... S5 $9 $5 $5 $5 $5 $9 $5 s9 $5 Suppose the effective annual rate is 5%. CF $5 $5 SI $5 s5 a) Calculate the present value (at t-0) of this cash flow series. (Hints: (1) What is the (effective) 2-year rate (E2YR)? (2) Can assume the "basic" cash flows are $5 each year.) b) Is it possible to find the future of this cash flow series? Explain.

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