Canadian Securities Course (CSC) Level 1 Practice Exam

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What are the steps to finding the Present Value?

Calculate the future value first
Determine the coupon payments
Calculate just the interest rate
You must calculate the PV of the principal, then calculate the PV of the Income stream and add the two together.

The correct answer is: You must calculate the PV of the principal, then calculate the PV of the Income stream and add the two together.

To find the Present Value (PV), the correct steps involve calculating the PV of the principal amount first, followed by determining the PV of the income stream. By adding these two PV amounts together, you arrive at the total present value. This method takes into account both the initial investment (principal) and the future cash flows (income stream) discounted back to their present value. This approach is a fundamental concept in finance to assess the current worth of future cash flows and investments. The other options (A, B, and C) do not align with the accurate process of calculating the Present Value.