(1 point) You deposit $200 in an ldeal Bank with rate r-0.04 compounded annually

Question

(1 point) You deposit $200 in an ldeal Bank with rate r-0.04 compounded annually After 1y you withdraw $100. After 2y you withdraw $100 Analyze the cash fiow stream relative to your bank account. Let To, 1, T2 represent the cash flow stream. Thern o200 In computing the present value of the cash flows, the discount factors are d(0, 0)1 The present values of the cash flows are PV[20] = | 200 The net present value of the cash flow stream is 100 d(0,1)9615 , d(0,2)9246 , PV[x1] =| 96.15 , 2296.15 The net future value (after 2 years) of the cash flow stream is FVxo,^1,E2320.32 Select the true statement After 2 years, the bank account still has a positive balance v

Explanation / Answer

X0 = -200, X1 = 100, X2 =100
d(0,0) = 1 , d(0,1) = 1/(1+0.04) = 0.9615, d(0,1) = 1/(1+0.04)2 = 0.9246
PVx0 = -200*1 = -200, PVx1 = 100*0.9615 = 96.15, PVx2 = 100*0.9246= 92.46

NPV (x0,x1,x2) = -200+ 96.15+92.46 = -11.39

Maximum 4 sub parts can be solved.

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Net future Value = -200*1.042+100*1.04+100 = -12.32

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