An investor has a cost of capital of 10%. She is due to receive a 5 year annuity starting in 3 year's time of $7,000 per annum. What lump sum amount would you need to offer today to make her indifferent between the annuity and your offer?

Q: Your father paid $10,000 (cf occurs at t=0) for an investment that promises to pay $850 at the end…

A: Expected rate of return can be described as the total profit or loss on a particular investment over…

Q: Alicia is considering two offers-to-purchase that she has received on a residential building lot she…

A: The criteria of deciding the better payment offer will be judged on the basis of present value which…

Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of…

A: The cost to buy an annuity today is calculated by discounting the annuity values with the present…

Q: You want to invest a lump sum at 5% interest so as to have $100,000 in 20 years. If you find an…

A: The Present Value of a lump sum: The Present Value of a lump sum can be computed with the formula:

Q: Ann invests $1000 today in an investment that has APR of 9.8% and is compounded monthly. How much…

A: 1) Future Value = Present value * (1+r)^n Where, r =rate of interest per period i.e. 9.8%/12 =…

Q: You are willing to pay $31,250 now to purchase a perpetuity that will pay you and your heirs $2,500…

A: Perpetuity refers to the future cash flow that occurs forever.

Q: What is the present value of this investment if the interest rate is 3​%?

A: Present value means the current value of money of some money in the future. PV factor = 1(1+r)n…

Q: esslyn has just given an insurance company RM1 million, a sum of money she just received from her…

A: The given problem can be solved using RATE function in excel. RATE function provides interest rate…

Q: Ms. Maya Manaco has P2,500,000 to invest for a ear. She can lend it to his brother who has agreed o…

A: Solution Given Alternative 1 Simple interest Rate 10% Present value 2500000…

Q: Amanda is going to invest to help with a down payment on a home. How much would she have to invest…

A: The concept of the time value of money states that the same amount of money has more value now than…

Q: r another 4 years. At the end of the 7th year, Jenna expects to sell the investment for $25,000. If…

A: The given problem can be solved using NPV function in excel.

Q: If Maggie has $5,000 to invest and wants to have $10,000 at the end of 9 years, what interest rate…

A: Calculate interest rate:interest rate is calculated by using excel formula:

Q: Sarah Wiggum would like to make a single investment and have ​$2.0million at the time of her…

A: Amount required in 35 years or future value (FV) = $2,000,000 Period (p) = 35 years Rate of return…

Q: You are looking at two investment options, A and B. Investment A is a 13-year annuity that needs an…

A: Compounding: Compounding is the method through which interest is added to both the principle balance…

Q: An investor requires an annual (year-end) income of $15,000 in perpetuity. Assuming a fixed rate of…

A: Information Provided: Yearly annual income = $15,000 Interest rate = 4%   NOTE: As per our…

Q: An investor requires an annual (year-end) income of $15,000 in perpetuity. Assuming a fixed rate of…

A: Information Provided: Annual income = $15,000 Interest rate = 4%   NOTE: As per our policy, we…

Q: You are offered an investment that will pay •$200 in year 1, •$400 the next year, •$600 the…

A: Time value tells that value received today is of more value than that of receiving the exact value…

Q: Hong is going to invest to help with a down payment on a home. How much would he have to invest to…

A: The amount required to invest today can be calculated as present value of future amount

Q: a.  If his opportunity cost is 9​% compounded​ annually, what value should he place on this…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: Your friend Anne is planning to invest $500 each year for five years and will earn a rate of 5.5…

A: According to the time value of money, the money available in the present is worth more than the same…

Q: Linda expects to receive P35,569.22 , 9 years from now. How much should she invests for three…

A: Annuity is the series of payment made by an investor over the period of time to accumulate future…

Q: Your brother has asked you for a loan and has promised to pay back $7,750 at the end of three years.…

A: Present value is the worth of amount in current time that is expected to be receive in some future…

Q: 4. Mr. Thomas will receive $8,500 a year for the next 15 years from her trust. If a 7 percent…

A: Introduction: The present value of annuity due refers to the current value of a series of future…

Q: How much is the annual interest rate, assuming compounding annually Molly should aim at if she…

A: Future Value is the value of current investments at a certain future date at the assumed…

Q: Suppose a woman has decided to retire as soon as she has saved $800,000. Her plan is to put $950…

A: Given: Future value =$800,000 Deposits per month = $950 Annual interest rate =2.4% So, monthly rate…

Q: A real estate investor feels that the cash flow from a property will enable her to pay a lender…

A: This is the problem of the time value of money wherein the interest rate is mentioned and gets…

Q: The Flemings will need $80,000 annually for 20 years during their retirement. How much will they…

A: The amount can be calculated using the Present value of Annuity.

Q: Morgan has $500,000 accumulated in her RRSP and intends to use the amount to purchase a 20-year…

A: Nominal rate of return is the stated rate of return on investment without considering expenses like…

Q: Suppose you invest in an annuity that pays 5% interest, compounded semiannually. How much will you…

A: Formula used as follows: S=R1+in-1iS=Future valuei=Interest rate per periodn=Number of…

Q: Ken Francis is offered the possibility of investing $2,745 today; in return, he would receive…

A: Interest rate: It can be defined as the percent of the principal loan balance, charged by the lender…

Q: Marian Plunket owns her own business and is considering an investment. If she undertakes the…

A: Cash flow (Year 1 - 3) = $4440 Cash flow (Year 0) = - $1110 Cash flow (Year 2) = - $5550 Interest…

Q: Marian Plunket owns her own business and is considering an investment. If she undertakes the​…

A: Calculation of net present value:

Q: Kala wants to save money to buy a motorcycle. She invests in an ordinary annuity that earns 4.8%…

A: Here, Interest rate = 4.8% compounded annually Future value of annuity = $5,000 Time period = 3…

Q: Alice Longtree has decided to invest $430 quarterly for 4 years in an ordinary annuity at 8%. As her…

A: Annuity payments are the set of periodic payments that an investor makes into his investment account…

Q: Sardor has been offered an investment that will pay him $500 three years from today. If his…

A: According to the time value of money concept, money available today has more purchasing power than…

Q: t cost her to buy such an annuity today

A: SOLUTION: Present Value ​=C×[1−(1+i)−n​/i]​                        =$50,000×[1-(1+0.725)]-30/0.725…

Q: urance investment plan promises Ms.valentine a lump sum cost of sh.5500000 after the end of 15 years…

A: The present value of future money is which can be received today based on the required rate and…

Q: Tanysha plans to invest $15,000 at the beginning of each year for the next 10 years. If her invested…

A: An annuity is defined as the series of payment made each year for a definite period of time. In…

Q: Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular…

A: An annuity is the fixed payment that an investor receives from an investment or fixed deposits made…

Q: Alice is considering an investment if she undertakes the investment, she will receive $5000 at the…

A: NPV is net present value which can be found from the difference between the present value of…

Q: An investor wants to save money to purchase real estate. He annuity with quarterly payments that…

A: Future value of annuity includes the amount deposited and amount of interest accumulated over the…

Q: How long will it take for Michelle's investment to be worth $55,000 if she presently has $32,000 and…

A: In the given question we require to compute the time period from the following details: Present…

Q: An investment will pay $150 at the end of each of the next 3 years, $200 at the end of Year 4, $400…

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

Q: Wildhorse Co. is considering investing in an annuity contract that will return $28,140 annually at…

A: Present value: This is the amount of future value reduced or discounted at a rate of interest till…