1) An investment has the following 6 cash flows, where the first cash flow occur

Question

1)

An investment has the following 6 cash flows, where the first cash flow occurs at time period 0. -10,000; -6,000; 8,000; 8,000; +2,000; -2,500.

Is this Simple or Nonsimple?_____________________

How many rates of return are there?_____________

2)

An investment has the following 5 cash flows, where the first cash flow occurs at time period 0. -10,000; +6,000; -4000, +2,000; +4,000.

Is this Simple or Nonsimple?__ ______________

How many rates of return are there? _____________

---------Please Explain--------------

Explanation / Answer

1 A Non Simple investment will have more than one sign change in the cash flow sequence Hence, the cashflow is non simple and there are two rates of return 2 A Non Simple investment will have more than one sign change in the cash flow sequence Hence, the cashflow is non simple and there are two rates of return

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