1. How would the salvage value be treated in a net present value calculation?
Disregard the salvage
As a positive cash flow in the final year that the asset is used
As a negative cash flow in the final year that the asset is used
As a negative cash flow in the first year that the asset is used
2.Consider a money market instrument with 50 days to maturity and a quoted ask price of 98. Which two of the following statements are correct as they relate to this instrument?
I. The bond equivalent yield is an effective annual rate.
II. The bank discount rate is lower than the bond equivalent yield.
III. The bank discount rate is an effective annual rate.
IV. The bond equivalent yield is lower than the effective annual rate.