Chapter 5 problems

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?

6. If you desire to have $80,000 for a down payment for a house in 7 years, what amount would you need to deposit each year for these 7 years? Assume that your money will earn 10 percent per year. 7. Kate deposits $9,900 each yearinto her retirement account. If these funds have an average earning of 11 percent over the 40 years until her retirement, what will be the value of her retirement account?

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

1:  Mr. Able owns a parcel of land that a local farmer has offered to rent for the next 10 years.  The farmer has offered to pay $75,000 today or an annuity of $15,000 at the end of each of the next 10 years.  Using a required rate of return of 5%, what option should Mr. Able choose?   2: You are planning to fund a scholarship at Kent State that will grant $50,000 every year in perpetuity.   There is an investment fund offering 6.25% per year.  How much upfront investment would it cost you to fund the account?

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

? 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!!!!

An aunt gifts you with $12,000, but only after you invest it for one year. She givesyou two choices.1. Invest the entire sum at 4.2% compounded monthly.2. Invest $1000 at 7.1% each month in an annuity that pays every month.(a) What is the future value of the money invested with method 1?(b) How much interest is earned with method 1?(c) What is the future value of the money invested with method 2?(d) How much interest is earned with method 2?(e) Which method would you choose?

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%

RETURN EARNED ON ANNUITY Lin Shan is about to retire and is exploring the possibility of investing a lump sum in an annuity so that she gets 50% of her last drawn salary at the end of every month for 15 years. She esti- mates her last-drawn salary to be ¥60,000. The quotation she obtained from Ping Tan Insurance requires her to invest a lump sum of ¥1 million. Calculate the return that Lin Shan is earning on her annuity. 5-7

If Jennifer contributes $500 every quarter into her superannuation fund for the next 45 years, how much will she accumulate assuming she can earn 8% p.a. and the first contribution is made immediately? Select one: a. $858,020.78 b. $652,810.16 c. $90,000.00 d. $875,181.20

Bha

Cammie won the lottery. She can take a single lump sum payout of $10 million dollars or receive $750,000 per year, beginning immediately, for the next 25 years. What rate of return would Cammie need to break even if she took the lump sum amount instead of the annuity? O 5.31% O 6.19 % O 4.98% 5.56%

Help

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%?

← A newborn child receives a $8,000 gift toward a college education from her grandparents. How much will the $8,000 be worth in 19 years if it is invested at 5.9% compounded quarterly? It will be worth $ (Round to the nearest cent.)

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