Calculate the same as above except with compound interest paid every 6 months. - answer✔1) I
= 3,000 + (3,000*0.08*4) = $3,960
2) FV = 3,000 * (1+0.08)^4 = $4,163.20
3) A = 3,000 * (1.08/2)^(6*2) = $4,228.43
Why do we prefer Present Value? - answer✔Because in business we usually make decisions in
the present (time zero)
Basic patterns of cash flow - answer✔A single amount: A lump sum amount either held currently
or expected at some future date.
An annuity: A level periodic stream of cash flow.
A mixed stream: A stream of unequal periodic cash flows
Financial decisions based on mixed-stream cash flows are most common in business!
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