2) The periodic rate is less than 3 %.
3) The present value would be greater if the lump sum were discounted back for more periods.
4) The present value of the $ 1,000 would be smaller if interest were compounded monthly rather than semiannually.
5) The PV of the $ 1,000 lump sum has a higher present value than the PV of a 3-year, $ 333.33 ordinary annuity.
14. Which of the following statements is CORRECT?
1) If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.
2) If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost.
3) To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise.
4) If you solve for I and get a negative number, then you must have made a mistake.
5) If CF0 is positive and all the other CFs are negative, then you cannot solve for I.
15. You are considering two equally risky annuities, each of which pays $ 5,000 per year for 10 years. Investment ORD is an ordinary( or