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Note: Correct answer to calculations-based questions will only be awarded full mark if clearly stated...

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Finance

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Note: Correct answer to calculations-based questions will only be awarded full mark if clearly stated numerical formula (including the left-hand side of the equation) is provided. Correct answer without calculations support will only receive a tiny fraction of mark assigned for the question. Question 1 (15 marks) a) Asset X generates a perpetual stream of cash flows of $100,000 every 3 months. The relevant interest rate is 12%, compounded quarterly. How much would you pay to buy Asset X today if the first payment occurs right away? (5 marks) b) You are considering depositing $1 million into a bank account. After one year, how much more interest on interest will you find in Account (A) that provides an interest of 12% compounded quarterly than Account (B) that provides an interest of 12% compounded semiannually? ( 5 marks) c) The Sharky Finance Ltd. has agreed to provide a loan to Meena on a "four-for-five" monthly basis. That is, for every $4 Meena borrows today, she has to repay a total of $5 a month later. What is the true yearly rate of this loan

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