A) the discount rate increases.
B) the cash flows are in the form of a deferred annuity, and they total to $100,000. you learn that the annuity lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000.
C) the discount rate decreases.
D) the riskiness of the investment's cash flows increases.
E) the total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.
G) A) and E)
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B) False
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A) $1,819
B) $1,915
C) $2,016
D) $2,117
E) $2,223
G) D) and E)
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A) $16,112
B) $16,918
C) $17,763
D) $18,652
E) $19,584
G) D) and E)
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A) $3,008
B) $3,342
C) $3,676
D) $4,044
E) $4,448
G) All of the above
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A) 9.29
B) 10.33
C) 11.47
D) 12.75
E) 14.02
G) A) and C)
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A) if cf0 is positive and all the other cfs are negative, then you cannot solve for i.
B) if you have a series of cash flows, each of which is positive, you can solve for i, where the solution value of i causes the pv of the cash flows to equal the cash flow at time 0.
C) if you have a series of cash flows, and cf0 is negative but each of the following cfs is positive, you can solve for i, but only if the sum of the undiscounted cash flows exceeds the cost.
D) to solve for i, one must identify the value of i that causes the pv of the positive cfs to equal the absolute value of the pv of the negative cfs. this is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise.
E) if you solve for i and get a negative number, then you must have made a mistake.
G) A) and B)
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A) the outstanding balance declines at a slower rate in the later years of the loan's life.
B) the remaining balance after three years will be $225,000 less one third of the interest paid during the first three years.
C) because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant.
D) interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant.
E) the proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
G) C) and D)
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