Answered: A corporation promises to pay you $4 a…

A corporation promises to pay you $4 a year for 20 years and $100 after 20 years. What is the maximum amount you would pay for the security if you wanted to earn 8 percent?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

See similar textbooks

Related questions

Q: By the end of this year you would be 35 years old and you want to plan for your retirement. You wish…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: As an engineer, you plan to put aside 20% of your yearly income. You expect to make Php1 million in…

A: Save 20% of Yearly Income Income in first year = 1,000,000 Savings in first year = 20% * 1,000,000 =…

Q: Billy has 44,000 dollars to invest in a stock market. He wants to be advised on this matter, by a…

A: Effective annual interest rate(EAR) can be calculated by using this equation EAR =1+imm -1 where…

Q: If you are offered 300,000 in 14 years and you can earn 16% on your money what is the present value…

A: To calculate the present value we will use the below formula Present value = FV/(1+r)n Where FV -…

Q: Felix Jones, a recent engineering graduate, expects a starting salary of $35,000 per year. His…

A: Solution : Due to averaged Increment in salary was 5% for last several years & interest rate was…

Q: Suppose Huron Corp. must make a $50 million pension payment every year for the next 5 years. Huron…

A: With the help of the given information we have to prepare a table.

Q: First City Bank pays 5 percent simple interest on its savings account balances, whereas Second City…

A: simple interest formula: A=p×1+rtwhere,A=amountP=principalr=ratet=time in years compound interest…

Q: You have just borrowed $240,000 and you agree to pay it back over the next 20 years in 20 equal…

A: Details given are : Present value of borrowing = $240000 Time period = 20 years Interest rate = 11%…

Q: An engineer plans to borrow $100,000 to open his own consulting business. He must repay $2,150 a…

A: using financial calculator, N = 5*12 =60 PMT = -2150 PV= 100,000 FV = 0

Q: 1. Assume you deposit $3,000 today, and $300 at the end of each year, in an account earning 4% per…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A businessman needs P500,000 for his operations. One financial institution is willing to lend him…

A: Borrowings are the liability that is used to finance the requirement of the funds. The borrower…

Q: financial institution is offering a six-year term deposit that will pay 7% per annum compounded…

A: 1) Value at end of 5 years Solved using Financial Calculator PV = -125,000 I/Y = 7/4 = 1.75 N = 5…

Q: The president of a growing firm wishes to give each of 15 employees a holiday bonus. How much is…

A: Given information: Number of employees is 15 Interest rate is 4% compounded monthly Bonus amount…

Q: How much will you invest every month, so by earning interest at 5% compounded monthly, there will be…

A: Future Value of Annuity: It computes the future value of the current annuity payment compounded over…

Q: Your employer automatically puts 5 percent of your salary into a 401(k) retirement account each…

A: FV is the future worth of cash flows that have occurred in the past or present.

Q: A construction firm wishes to give each 80 employees a holiday bonus. How much is needed to invest…

A: Annuity refers to the fixed periodic payments which are paid monthly, quarterly, semi-annually or…

Q: Suppose you earned a $595,000 bonus this year and invested it at 8.25% per year. How much could you…

A: Here, Bonus Amount is $595,000 Interest Rate is 8.25% per year Time Period is 20 years

Q: TA Corp. has a consulting contract with a firm that states that he will receive annual payments of…

A: We need to use present value of annuity due(payment due at beginning of year) formula for…

Q: Your company has a $100,000 loan for a new security system it just bought. The annual payment is…

A: To find the number of years in which the loan would be paid off. One can use NPER function in excel.…

Q: You are an employee that earns 20,000 per month. Assuming that you want to invest half of the amount…

A: The given problem can be solved using FV function in excel. FV function computes accumulated amount…

Q: As an engineer, you plan to put aside 20% of your yearly income. You expect to make Php1 million in…

A: Savings = 20% of yearly Income N = 6 First year income = 1,000,000 Savings = 20%*1,000,000 Savings =…

Q: If I lend $40,000 to my friend at 8% per year simple interest, what compound interest rate would…

A: Given: Amount = $40,000 Interest rate = 8% Years = 10

Q: A. You are offered an investment that will pay you $200 in one year, $400 the next year, $600 the…

A: The present value is today's value of future cash flows. It represents the discounted value of cash…

Q: The president of a growing engineering firm wishes to give each of 50 employees a holiday bonus. How…

A: The total number of employees is 50 and the total bonus to be received is $60,000 (50 employees ×…

Q: You have $7,000 to invest in a 2-year certificate of deposit (CD) that pays 8% interest compounded…

A: The future value is the amount that will be received at the end of a certain period. In simple…

Q: company offers you employment for the next 30 years until retirement but will not pay you a pension…

A: In this we have to calculate the monthly deposit upto retirements and than how much can be withdrawn…

Q: You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a…

A: Using excel FV and PMT function

Q: A $500,000 whole life policy is available for $5150 per year, payable at the beginning of the year.…

A: Life policy per year $ 5,150 Insurance amount ($5,150 x 10%) $ 515 Savings plan ($5,150 x 90%) $…

Q: You expect to receive $150,000 per year on a contract that will last 5 years. You are trying to…

A: Present value of future cash inflows will be equal to the worth of contract today. Worth of…

Q: You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two…

A: The current worth of the cash flows or an asset after discounting is termed as the present value.

Q: Your firm has a retirement plan that matches all employee contributions with employer contributions…

A: The value of current payment or upcoming flow of payments at any future date when flow of payment…

Q: Your beginning salary is $70,000. You deposit 12% at the end of each year in a savings account that…

A: Given information: Beginning salary is $70,000 Interest rate is 3% Initial payment of 12% Salary…

Q: felix jones, a recent engineering graduate, expects a starting salary of $35,000 per year. his…

A: Present value is defined as the current value of the future sum of funds or the cash flows stream at…

Q: If an investor intends to double $35,000 by investing in a bank that pays 6% interest per year,…

A: Present value = $ 35000 Future value = 35000*2 = $ 70,000 Annual interest rate = 6%

Q: You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two…

A: Here the given rate is APR and as it is compounded monthly we need to find the EAR. EAR =…

Q: You are a CEO of a company and your company wants to invest $100,000 for the period of five years.…

A: The future value of an investment represents the initial value invested plus accumulated interest…

Q: You are planning to save for retirement over the next 30 years. To do this, you will invest K700 a…

A: Time Period 30 Stock Return 10% Bond Return 6% Amount In Stock K 700.00 Amount In…

Q: Greg wants to have $50 000 in five years. He has $20 000 today to invest. The bank is offering five-…

A: here we need to find the interest rate.wherein we have been given the future value and present…

Q: You decide to invest in an instrument that pays 5% annual capitalizable interest each semester. If…

A: The present value is the value of the sum received at time 0. It is the current value of the sum…

Q: You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two…

A: Given, Interest rate = 9% per annum compounded monthly = 0.75% per month Option 1 = 66000 each…

Q: If the interest rate is 9 percent compounded monthly, what is the value today of each option?

A: Present Value: It represents the present worth of the future sum of the amount or future annuity…

Q: Your group receives a phone proposal to invest in a new business. Thecaller informs you that it will…

A: The question gives the following information:

Q: The Aggarwal Corporation needs to save 10 million to retire a 10 million mortage that matures in 10…

A: According to the time value concept, money available today is worth more than the same amount of…

Q: The manager has 5 employees whose combined salaries through the end of this year are $300,000. If he…

A: The current worth of funds to be received in the future with one or more payments, discounted at a…

Question

A corporation promises to pay you $4 a year for 20 years and $100 after 20 years. What is the maximum amount you would pay for the security if you wanted to earn 8 percent?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

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
If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
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 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.