John has made a financial arrangement to borrow $2,000 at the end of the 1st year and another $2,000 at the end of the 4th and 6th year; while another $3,000 at the end of the 2nd and 7th year. The nominal interest rate varies over the next few years as shown in the following table
|
Year
|
0 to 3
|
3 to 6
|
6 to 9
|
|
Nominal Interest Rate i
|
10%, compounded monthly
|
15%, compounded yearly
|
12%, compounded quarterly
|
(a) Draw the cash flow diagram for John.
(b) It is required for John to repay all the borrowed money at the end of eight years, how much will be repaid by John as a lump-sum amount at the end of eight years?
(c) Determine the present equivalent value (PW) of John's cash flow.