1) An investment has the following 6 cash flows, where the first cash flow occur
ID: 2730794 • Letter: 1
Question
1)
An investment has the following 6 cash flows, where the first cash flow occurs at time period 0. -10,000; -6,000; 8,000; 8,000; +2,000; -2,500.
Is this Simple or Nonsimple?_____________________
How many rates of return are there?_____________
2)
An investment has the following 5 cash flows, where the first cash flow occurs at time period 0. -10,000; +6,000; -4000, +2,000; +4,000.
Is this Simple or Nonsimple?__ ______________
How many rates of return are there? _____________
---------Please Explain--------------
Explanation / Answer
1 A Non Simple investment will have more than one sign change in the cash flow sequence Hence, the cashflow is non simple and there are two rates of return 2 A Non Simple investment will have more than one sign change in the cash flow sequence Hence, the cashflow is non simple and there are two rates of return