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Which is a reasonable number for the present value

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Problem 1: Assume that you are calculating the future value (FV) of a single sum earning interest at 8% per year, compounded semiannually, for 8 years. If the compounding were changed to quarterly, then

A. the number of periods would increase from 8 to 16.

B. the number of periods would increase from 16 to 32.

C. the rate per period would decrease from 4% to 2%.

D. both A and C.

E. both B and C.

Problem 2: Assume that you will receive $2500 at the end of 6 years and want to know the present value (PV) of that sum. Which of the following is a reasonable number for the present value of the $2500? Even without knowing the required rate of return, it is possible to answer this question.

A. $2700.00

B. $2572.50

C. $2632.45

D. $2315.67

E. None of the above.

Reference no: EM132686613

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