3. A series of cash flows consists of 6 annual payments of $5,000 each. a. Are the cash flows an annuity? What are the three characteristics of an annuity? b. Draw the timeline for the cash flows FOUR times and perform the calculation called for using the formulas and solving mathematically. Then write out the variables to input in the financial function of your calculator. The annual rate is 5.50%. ddd CF Timeline Ordinary Annuity - PVA I-----I- [---------------I CF Timeline Ordinary Annuity - FVA I--------------------1-----1-----1 PVA = n= i= PV= FVA = PMT = n= PMT = FV = i= Mode = PV= FV = Mode = CF Timeline Annuity Due = PVA due I------------------------------I PVA = CF Timeline Annuity Due - FVA due I---------------1-----1-----1-----I FVA = n= PMT= n= 1= FV = i= PV= Mode = PV= PMT = FV = Mode =

3. A series of cash flows consists of 6 annual payments of $5,000 each. a. Are the cash flows an annuity? What are the three characteristics of an annuity? b. Draw the timeline for the cash flows FOUR times and perform the calculation called for using the formulas and solving mathematically. Then write out the variables to input in the financial function of your calculator. The annual rate is 5.50%. ddd CF Timeline Ordinary Annuity - PVA I-----I- [---------------I CF Timeline Ordinary Annuity - FVA I--------------------1-----1-----1 PVA = n= i= PV= FVA = PMT = n= PMT = FV = i= Mode = PV= FV = Mode = CF Timeline Annuity Due = PVA due I------------------------------I PVA = CF Timeline Annuity Due - FVA due I---------------1-----1-----1-----I FVA = n= PMT= n= 1= FV = i= PV= Mode = PV= PMT = FV = Mode =

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 2STP

See similar textbooks

Similar questions

You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?
You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
Refer to the present value table information on the previous page. What amount should Brett have in his bank account today, before withdrawal, if he needs 2,000 each year for 4 years, with the first withdrawal to be made today and each subsequent withdrawal at 1-year intervals? (Brett is to have exactly a zero balance in his bank account after the fourth withdrawal.) a. 2,000 + (2,000 0.926) + (2,000 0. 857) + (2,000 0.794) b. 2,0000.7354 c. (2,000 0.926) + (2,000 0.857) + (2,000 0.794) + (2,000 0.735) d. 2,0000.9264