MGAC01H3 Study Guide - Final Guide: Unsecured Creditor, Finance Charge, Securitization
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Finance
1. What is the present value of $800 to be received at the end of eight years, assuming the following annual interest rate?
a. 4 percent, discounted annually
b. 8 percent, discounted annually
c. 20 percent, discounted quarterly
d. 0 percent
2. BASIC 13. Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of $10,000. Assuming that you desire a 10 percent return on your initial investment, compute the net present value of the two alternatives and evaluate their relative attractiveness:
Investment 1 | Investment 2 | ||
Cash Flows | Year | Cash Flows | Year |
5,000 | 1 | 8,000 | 1 |
6,000 | 2 | 7,000 | 2 |
7,000 | 3 | 6,000 | 3 |
8,000 | 4 | 5,000 | 4 |