Question

Two cashflows A and B consist of three payments at t = 0, 1, 2 where...

Two cashflows A and B consist of three payments at t = 0, 1, 2 where t is in years. CashflowAisC0A =1, C1A =−3.2, C2A =−1.2whilecashflowBisC0B =2, C1A = −5.35, C2A = −.045. Find the effective annual interest rates where the NPV of cashflow A is larger than the NPV of cashflow B (assuming we use the same rate for both cashflows!)

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Answer #1

Two cashflows A and B consist of three payments at t = 0, 1, 2 where t is in years. CashflowAisC0A =1,

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