Time Value of Money 1) A store offers two payment plans. Under the installment plan, you pay 20% down and 20% of the purchase price in each of the next 4 years. If you pay the entire bill immediately, you can take a 5% discount from the purchase price. | a. | Calculate the present value of the payments, if you can borrow or lend funds at a 7% interest rate. Assume the product sells for $100. (Do not round intermediate calculations. Round your answer to 2 decimal places.) | Present value | $ | b. | Calculate the payment net of discount. | Payment net of discount | $ | c. | Which is a better deal? | | | | | Pay the entire bill immediately | | Installment plan | |

2) Home loans typically*…show more content…*

What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 22.25%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Effective annual rate | % |

5) You believe you will need to have saved $520,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 5% per year, how much must you save each year to meet your retirement goal? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Annual savings | $ |

6)

Your consulting firm will produce cash flows of $110,000 this year, and you expect cash flow to keep pace with any increase in the general level of prices. The interest rate currently is 6.2%, and you anticipate inflation of about 2.2%. |

a. | What is the present value of your firm’s cash flows for years 1 through 6? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Present value | $ |

b. | How would your answer to (a) change if you anticipated no growth in cash flow? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Present value | $ |

7)

-------------------------------------------------

Top of Form Good news: You will almost certainly be a millionaire by the time you retire in 40 years. Bad news:

2) Home loans typically

What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 22.25%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Effective annual rate | % |

5) You believe you will need to have saved $520,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 5% per year, how much must you save each year to meet your retirement goal? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Annual savings | $ |

6)

Your consulting firm will produce cash flows of $110,000 this year, and you expect cash flow to keep pace with any increase in the general level of prices. The interest rate currently is 6.2%, and you anticipate inflation of about 2.2%. |

a. | What is the present value of your firm’s cash flows for years 1 through 6? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Present value | $ |

b. | How would your answer to (a) change if you anticipated no growth in cash flow? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |

Present value | $ |

7)

-------------------------------------------------

Top of Form Good news: You will almost certainly be a millionaire by the time you retire in 40 years. Bad news:

Related

- Decent Essays
## MAT 540 MIDTERM EXAM Essay

- 1302 Words
- 6 Pages

27. The drying rate in an industrial process is dependent on many factors and varies according to the following distribution. Compute the mean drying time. Use two places after the decimal. 28. A loaf of bread is normally distributed with a mean of 22 oz and a standard deviation of 0.5 oz. What is the probability that a loaf is larger than 21 oz? Round your answer to four places after the decimal. 29. An investor is considering 4 different opportunities

- 1302 Words
- 6 Pages

Decent Essays - Satisfactory Essays
## Interest and Answer Score Explanation

- 1583 Words
- 7 Pages

etc.). Enter all dollars without decimals and all interest rates

- 1583 Words
- 7 Pages

Satisfactory Essays - Satisfactory Essays
## ACC 423 Final Exam

- 2072 Words
- 9 Pages

Also outstanding all year were 6,330 shares of cumulative preferred stock , each convertible into 2 shares of common . The preferred stock pays an annual dividend of $5 per share. DiCenta’s tax rate is 40%. Compute DiCenta’s 2012 diluted earnings per share. (Round answer to 2 decimal places, e.g. 5.23.) Question-9 Ferraro Inc. established a stock appreciation rights (SAR) program on January 1,2012, which entitles executives to receive cash at the exercise for the

- 2072 Words
- 9 Pages

Satisfactory Essays - Satisfactory Essays
## Derivatives 200079 Midsemester Exam

- 1821 Words
- 8 Pages

Take logs of b.s. r4 = 0.28768207 r 0.28768207/4 r = 0.0719205 10. The current price of silver is $750. Storage costs are $8 per ounce per quarter payable in advance. The interest rate is 12% p.a. with continuous compounding. Calculate the futures price of silver for delivery in six months (to two decimal places). A: $721.44 B: $659.43 C: $813.12* D: None of the above F0 = (S0 + U)erT U = $8 + $8e-0.12*0.25 U = $8 + $7.763564265 F0 = ($750+ $15.76356427)e0.12*0.5 F0 = $813

- 1821 Words
- 8 Pages

Satisfactory Essays - Satisfactory Essays
## ACC 422 Final Exam Wileyplus

- 1802 Words
- 8 Pages

(Round computation for cost-to-retail ratio percentage and answer to 0 decimal places, e.g. 25,250.) Question 10 Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory May 1 $184,000 Purchases (gross)

- 1802 Words
- 8 Pages

Satisfactory Essays - Decent Essays
## Supply and Demand Essay

- 3083 Words
- 13 Pages

1. A firm's current profits are $1,000,000. These profits are expected to grow indefinitely at a constant annual rate of 3.5 percent. If the firm's opportunity cost of funds is 5.5 percent, determine the value of the firm: Instructions: Round your responses to 2 decimal places. a. The instant before it pays out current profits as dividends. $ million b. The instant after it pays out current profits as dividends. $ million (page 18) Explanation: a. The value of the firm

- 3083 Words
- 13 Pages

Decent Essays - Better Essays
## Hsc General Math Textbook with Answers

- 153542 Words
- 615 Pages

on this title: www.cambridge.org/9780521138345 © The Powers Family Trust 2010 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2010 Edited by Marcia Bascombe Designed by Sylvia Witte Typeset by Aptara Corp. Printed in China by Printplus Limited. National Library of Australia

- 153542 Words
- 615 Pages

Better Essays - Good Essays
## Financial and Economic Analysis

- 1836 Words
- 8 Pages

Financial and Economic Analysis (BMBA 9113) Problem Set II (130 points) Directions: Answer the following problems IN DETAIL. Your analysis must be typed and should be free of grammatical errors and “slang” terms.” Wherever appropriate, make sure you supplement your discussion with graphical analysis and equations. The graphs may be hand drawn, but please make sure they are neat. There are no restrictions or requirements on working in groups. The one exception is that each person must hand

- 1836 Words
- 8 Pages

Good Essays - Satisfactory Essays
## Variable Cost and Net Operating Income

- 14642 Words
- 59 Pages

cost per cup of coffee served is $0.22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round average cost per cup of coffee to 3 decimal places. Omit the "$" sign in your response.) 2,000 Fixed cost Variable cost Total cost Average cost per cup of coffee served $ $ $ 0.60 0.22 0.82 0.792 Correct response

- 14642 Words
- 59 Pages

Satisfactory Essays - Satisfactory Essays
## Slides

- 4031 Words
- 17 Pages

at a rate of interest of 5 per cent p.a. the ﬁnal amount is 20, 000 EUR? Solution It follows from Equation 1 that A P= . (1 + i)t Substituting t = 6, i = 0.05 and A = 20, 000, we obtain A 20, 000 P= = = 14, 924.31 EUR 6 (1 + i) (1 + 0.05)6 i.e., the principal required now is equal to 14, 924.31 EUR. Assoc. Prof. Nguyen Dinh Dr. Nguyen Ngoc Hai CALCULUS 2 (BA) Compound interest Part year investment Often, we do not have an annual period for interest payments, i.e. compounding takes place several

- 4031 Words
- 17 Pages

Satisfactory Essays

- The Airline Industry Value Chain Essay
- Evaluate Alternative Measures Which Can Be Used to Reduce Unemployment.
- Essay on Advertising Through Social Media
- Essay on The Impact of Financial Crisis on the Uk Job Market
- Should Alcohol and Tobacco Advertisement Be Banned? Essay
- The Piano - Not A Feminist Film Essay