(show work) 2 If you deposit $1,000 now and are promised payments of $500 three
ID: 2087418 • Letter: #
Question
(show work)
2 If you deposit $1,000 now and are promised payments of $500 three years from now and $1,500 five years from now, the equation that will yield the correct rate of return is:
A) -1000 = 500(P/F,i,3) + 1500(P/F,i,5)
B) 0 = 1000 + 500(P/F,i,3) + 1500(P/F,i,5)
C) 1000 = -500(P/F,i,3) - 1500(P/F,i,5)
D) 0 = -1000 + 500(P/F,i,3) + 1500(P/F,i,5)
3 For the equation: 5,000 = 1,000(P/F,i,1) - 2,000(P/F,i,2) + 7,000(P/F,i,7) + 7,000(P/F,i,9), the number of possible rate of return values is:
A) 1
B) 2
C) 3
D) 4
4there is more than one sign change in the net cash flow of a rate of return equation, the possible rate of return values will fall in the range of:
A) minus infinity to plus infinity
B) minus 100% to plus infinity
C) minus 100% to plus 100%
D) minus infinity to plus 100%
5 When multiple rate of return values are possible for a rate of return equation, one way to come up with a single value which satisfies the equation is:
A) Solve for the internal rate of return
B) Use the project net investment procedure
C) Eliminate all rate of return values above 100%
D) Eliminate all rate of return values below 0%
Explanation / Answer
1. correct answer is
A) 0= -1000 + 500(p/f,i,3)+1500 ( p/F,i,5)
2.The number of possible rate return value is: c ) 3
Because more than 1 sign changes on net cash flows
Cash flow 0 = -
Cash Flow 1 = +
Cash Flow 2 = -
Cash flow 3 = +
Cash flow 4 = +
4. there is more than one sign change in the net cash flow of a rate of return equation, the possible rate of return values will fall in the range of
: B) minus 100% to plus infinity,
5. When multiple rate of return values are possible for a rate of return equation, one way to come up with a single value which satisfies the equation is:
C) Eliminate all rate of return values above 100%
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