Global Financial Management Essay Example | Topics and Well Written Essays - 500 words - 1

Global Financial Management - Essay Example With reasons. We have an equation with only one unknown, so we can solve it to find PMT.The easy way is with a financial calculator. Input N=3, I/YR = 10, PV = 1000, FV = 0, and then press the PMT button to get PMT = 402.1148036, 10) Suppose that on January 1 you deposit $100 in an account that pays a nominal (quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think on annual compounding, when INom = EFF% = I per.). What would be wrong with your answers to part (1) and (20) if you used the nominal rate of 10% rather than the periodic rate Nom/2 = 10% /2 = 5%? INom can be used in the calculations only when annual compounding occurs. If the nominal rate of 10% were used to discount the payment stream, the present value would be overstated by $272.32- $247.59 = $24.73. 12) Suppose someone offered to sell you a note calling for the payment of $1000 in 15 months. They offer to sell it to you for $850 .You have $850 in a bank time deposit that pays a 6.76649% nominal 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. The note is not risky you are sure it will be paid on schedule. Should you buy the note? Check the decision in three ways (1) by comparing your future value if you buy the note verses leaving your money in the bank; (2) by comparing the PV of the note with your current bank account and (3) by comparing the EFF $ on the note with that of the bank