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Choose the Correct answer – supplement your answer with calculations.

a.  What value of C makes the two annual cash flows equivalent at an annual rate of 10%?

 

$99                $150                $220                $160

b.  Suppose you deposit $C at the end of each month for 10 years at an interest rate of 12%, compounded monthly. What equal end-of-year deposit over 10 years would accumulate the same amount at the end of 10 years under the same interest compounding?

A = [C(F/A, 1%, 120)] X (A/F, 12%, 10)

A = C(F/A, 1.005%, 120) X (A/F, 12.68%, 10)

A = [12C(F/A, 12.75%, 10)] X (A/F, 12.75%, 10)

A = C(F/A, 1.005%, 12)

None of the above

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