ASSIGNMENT 6

Financial Management-I
BBA-II
Instructor: Mehvish Umer
Spring Semester 2021

1. What is the PV of a 5 year ordinary annuity of $100 plus an additional $500 at the end of
year 5 if the interest rate is 6%? What is the PV if the $100 payments occur in Years 1
through 10 and the $500 comes in at the end of year 10?

2. A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He
has been offered three possible 4-year contracts. Payments are guaranteed, and they would be
made at the end of each year. Terms of each contract are as follows:

As his adviser, which contract would you recommend that he accept?

3. An investment costs $465 and is expected to produce cash flows of $100 at the end of Year
1, $200 at the end of Year 2, and $300 at the end of Year 3. What is the expected rate of return
on this investment?