Chapter 5 problems

Perpetuity: Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,000 a year forever, starting when he retires. If he can earn 6.5 percent annually, how much does your grandfather need to invest to produce the desired cash flow? Please use Excel to solve

Using the time value of money Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the following scenarios (you get to choose): |1. $8,750 per year at the end of each of the next seven years 2. $50,050 (lump sum) now 3. $100,250 (lump sum) seven years from now Requirement 1. Calculate the present value of each scenario using a 6% discount rate. Which scenario yields the highest present value? Round to nearest whole dollar. 2. Would your preference change if you used a 12% discount rate?

Delia purchases an annuity that will pay her $10,000 per year for the next 10 years starting next year.  Assuming a rate of 6%, what is the value of the annuity.  Choose the closest. a) $106,000 b) $131,808 c) $159,374 d) $171,569

Your uncle Barry is about to retire, and he wants to buy an annuity that will provide him with $77,000 of income a year for 25 years, with the first paying coming immediately and future payments occurring at the BEGINNING of the respective years. The interest rate on this annuity is 8.50%. How much would it cost him to buy the annuity today? (Ch. 5) Group of answer choices $957,617.32 $820,814.85 $855,015.47 $786,614.23 $788,032.69

Jane Bauer has won the lottery and has the following four options for receiving her winnings: Receive $100,000 at the beginning of the current year Receive $108,000 at the end of the year Receive $20,000 at the end of each year for eight years Receive $10,000 at the end of each year for 30 years Jane can invest her winnings at an interest rate of 8% compounded annually at a major bank. Use the appropriate present or future value table: FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1 Calculate the Present value for each of the above options. Round all answers to the nearest dollar.   Present Value Option 1 $fill in the blank 1 Option 2 $fill in the blank 2 Option 3 $fill in the blank 3 Option 4 $fill in the blank 4 Which of the payment options should Jane choose?

Problem 9: : Value of an Annuity vs. a Single Amount Raymund just won the lottery. He can get his prize either in the form of $40,000 at the end of each of the next 25 years (that is, $1,000,000 over 25 years) or as a single amount of $500,000 paid immediately. If he expects to be able to earn 5% annually on his investments over the next 25 years, ignoring taxes and other considerations, which alternative should he take? Why? Would his decision in part a change if he could earn 7% rather than 5% on his investments over the next 25 years? Why?

6) Jia has just won a $20 million lottery, which will pay her $1 million at the end of each year for 20 years. An investor has offered her $10 million for this annuity. She estimates that she can earn 10 percent interest, compounded annually, on any amounts she invests. She asks your advice on whether to accept or reject the offer. What will you tell her? (Ignore Taxes) Policy A: You will receive equal annual payments of $10,000 beginning 35 years from now for 10 years. Policy B: You will receive one lump-sum of $100,000 in 40 years from now. Which policy would you choose? Assume rate of interest is 6 percent

Scarlett is considering investing $10,000 she will receive from a trust fund when she turns 25 years old. If she invested the money for three years at 4% per year, compounded annually, what would her investment be worth at the end of three years? Note: Assume this problem uses Compounding Interest (compounded annually), NOT Simple Interest. $10,400 $11,200 $11,249 O $10,816

solve parts C and D a) Barney Rubble expects to retire in 10 years and would like to accumulate £100,000 in his pension fund. If the annual interest rate is 6% (Annual Percentage Rate), how much should Barney put into his pension fund each month in order to achieve his goal? (Assume that Barney will deposit the same amount each month.) b)   As winner of a lottery, you can choose one of the following prizes: (i)   £100,000 now (ii)  £180,000 at the end of 5 years (iii) £12,000 every year forever If the interest rate is 12%, which prize is the most valuable?          c)You decide to pay on your bank account £1,000 every year for the next 10 years, starting today (total of 10 annual payments of £1,000). Five years after the last payment, you decide to withdraw £1,000 every year for 10 years. If the annual interest rate is 5%, how much money do you have left on your bank account right after the last withdrawal? c)   You decide to pay on your bank account £1,000 every year for the next…

? You would like to have enough money saved to receive a $53,000 per year perpetuity after retirement. How much would you need to have saved in your retirement fund to achieve this goal? Assume that the perpetuity payments start on the day of your retirement. The annual interest rate is 8 percent. O -00 Multiple Choice $715,500 $1,060,000 $530,000

Help!!!!

Your girlfriend just won the Florida lottery. She has the choice of $10,700,000 today or a 20-year annuity of $1,050,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.   a. 6.08%   b. 7.51%   c. 8.71%   d. 7.43%   e. 5.93%

You are offered an investment that will pay •$200 in year 1, •$400 the next year, •$600 the following year, and •$800 at the end of the 4th year. •You can earn 14 percent on similar investments. What is the most you should pay for this one? Respuesta:

1. Paulo won the lottery. He is offered a series of payments of $100,000 per year for 10 years. What is the present value of these payments at an interest/discount rate of 6%? PV = FV = 1 = N = Pmt= Answer: 2. Keesha's grandmother died and left a trust for her that pays out $2,000 per month for 15 years. If Keesha invests the payments at 8%, what will her future value be? PV = FV = 1= N= Pmt= Answer:

Value of an annuity versus a single amount Personal Finance Problem Assume that you just won the state lottery. Your prize can be taken either in the form of $37,000 at the end of each of the next 20 years (that is, $740,000 over 20 years) or as a single amount of $508,000 paid immediately. a. If you expect to earn 7% annually on your investment over the next 20 years, ignoring taxes and other considerations, which alternative should you take? Why? b. Would your decision in part a change if you could earn 9% rather than 7% on your investments over the next 20 years? Why? c. At approximately what interest rate would you be indifferent between the two options?

Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $160,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? O 2.28% O 2.20% O 2.22% 2.33% 2.59%

You would like to give your daughter $75,000 towards her college education 16 years from now. How much money must you set aside today for this purpose if you can earn 8 percent on your investments? Group of answer choices $28,417.67 $18,388.19 $29,311.13 $21,891.79 $20,270.17

5. Kristie owns a perpetuity which pays $12,000 at the end of each year. She comes to youand offers to sell you all of the payments to be received after the 10th year. What is themaximum amount that you should offer her if the required return is 8%?

If Maggie has $5,000 to invest and wants to have $10,000 at the end of 9 years, what interest rate must she earn on her money, assuming annual compounding? Select one: a. 5% b. 6% с.790 d. 8% e. None of the above O

On a whim you purchased a scratch−off lottery ticket at the gas station. It must have been your lucky day because you won $3,000,000. Being logical and rational you decide to invest the money at 5​% for 14 years until you are ready to start a family. At the end of 14 ​years, how much will your investment be​ worth? -the future value of​ $1 table -the future value of annuity of​ $1 table

Solve only question number 7

How much would you be willing to spend for an annuity that pays $2,500 at the end of each year for three years, assuming you could earn 5.5% on other LIET similar investments? Select one: O a. $5,494 O b. $4,783 O c. $6,087 O d. $6,408 O e. $6,745 ہے

Your father is considering purchasing an annuity that pays $5,000 at the beginning of each year for 5 years. He could earn 4.5% on his money in other investments with equal risk. What is the most he should pay for the annuity? 20,701 $21,791 $22,938 $24,085 $25,289

Can u show me the formula u use aswell

Assume that you just won the state lottery. Your prize can be taken either in the form of 100,000 at the end of each of the next 15 years or as a single amount of $1,000,000 paid immediately. If you expect to be able to earn 5% annually on your investments, ignoring taxes and other considerations, which alternative should you take? Why?