SOA Exam FM Sample Question 391
Study guide: Exam FM-2
A company is considering a project where it expects to pay and receive the following cash flows:
| End of year | Cash flow |
|---|---|
| 2 | Receives X |
| 4 | Pays Y |
| 6 | Receives X |
When calculated using an annual effective rate of i (i > 0), the present value of this project is equal to 0.
Determine i.
- A)
\dfrac{Y \pm \sqrt{Y^{2} - 4X^{2}}}{2X} - B)
\dfrac{Y \pm \sqrt{Y^{2} - 4X^{2}}}{2X} - 1 - C)
\sqrt{\dfrac{-Y \pm \sqrt{Y^{2} - 4X^{2}}}{2X}} - 1 - D)
\sqrt{\dfrac{2X}{-Y \pm \sqrt{Y^{2} - 4X^{2}}}} - 1 - E)
\sqrt{\dfrac{2X}{Y \pm \sqrt{Y^{2} - 4X^{2}}}} - 1
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