CORPORATE FINANCE MINICASE 4 Scholarship Essay Example | Topics and Well Written Essays - 2000 words

CORPORATE FINANCE MINICASE 4 - Scholarship Essay Example0 1 2 3 -1 2 FV = $1(1 + i)3= $2. $1(1 + i)3= $2. (1 + i)3= $2/$1 = 2. 1 + i= (2)1/3 1 + i= 1.2599 i= 25.99%.e. What is the difference between an run-of-the-mine annuity and an annuity due What type of annuity is shown under How would you change it to the other type of annuity (Ehrhardt & Brigham, 2006) 0 1 2 3 century snow 100An ordinary annuity has payments at the end of the period, while an annuity due date has payments in the beginning of the period.The annuity shown above is an ordinary annuity. To change it, just shift each payment to the left. This instruction there would be a 100 under 0 but none under 3. 0 1 2 3 100 100 100f. (1) What is the future value of a 3-year ordinary annuity of $100 if the appropriate interest rate is 10% (Ehrhardt & Brigham, 2006)0 1 2 3 100 100 100 110 121 $331FVAn= $100(1) + $100(1.10) + $100(1.10)2 =... k. Suppose on January 1 you deposit $100 in an eyeshade that pays a nom inal, or quoted, interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your neb on October 1, or after 9 months (Ehrhardt & Brigham, 2006)It is an annuity in the sense that there are invariant payments at regular intervals, but the intervals do not correspond with their compounding periods. In situation care these, we calculate the EAR and then treat it as an annuity.(4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what coach holds (Hint Think of one-year compounding, when INOM= EFF%= IPER.) What would be wrong with your answer to Questions l-(1) and l-(2) if you used the nominal rate (10%) earlier than the periodic rate (INOM/2= 10%/2 = 5%) (Ehrhardt & Brigham, 2006)m. Suppose someone offered to sell you a note calling for the payment of $1,000 fifteen months from today. They offer to sell it to you for $850. You have $850 in a lingo time deposit that pays a 6.76649% nom inal rate with daily compounding, which is a 7% effective annual interest rate, and you plan to leave the money in the bank unless you buy the note.