Answered: how much will you pay for the policy?

Business

Finance

how much will you pay for the policy?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA3: Time Value Of Money

Section: Chapter Questions

Problem 7CE

See similar textbooks

Related questions

Q: The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and…

A: Solution- The present value of the policy paying fixed sum each year cab be calculated as present…

Q: If the Alfa Life Insurance Co. will pay you and your heirs $1 at the beginning of each year forever,…

A: In this question we need to calculate the Present value of perpetuity i.e. amount you will pay for…

Q: You are thinking about purchasing an investment from Get-Rich-Quick Investmemnt company. If you buy…

A: Present value of annuity (PVA) formula: PVA=A×1-11+rmn×mrm A=annuity r=rate n=number of years…

Q: You have received a settlement from an insurance company which will pay you $100,000 per year for 12…

A: Present Value is the amount of money on hand currently, whereas future value is the amount of…

Q: You want to buy a house within 3 years, and you are currently saving for the down payment. You plan…

A: Future Value|(FV) is worth of current payment at future date. It is computed by compounding that…

Q: Your client is 38 years old. She wants to begin saving for retirement, with the first payment to…

A: Given: Particulars Client age 38 Savings 5000 Return 10% age 65 age 70

Q: You want to buy a house within 3 years, and you are currently saving for the down payment. You plan…

A: as the annual savings are increasing, we can use the following formula for Future value of growing…

Q: To help with a down payment on a home, Teresa is going to invest. Assuming an interest rate of 1.64%…

A: Here, Future Value of Investment is $39,400 Investment Period is 8 years Therefore, Monthly…

Q: Suppose you are offered two options: (i) receive Taka 30,000 at the end of 5 years or (ii) receive…

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

Q: Larry's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: Given: Payment = $25,000 Interest rate = 7.9%

Q: 2. An brokage house employee is trying to sell you investment instrument, which for a single amount…

A: Present value = Annuity * PVAF ( rate, years ) Present value = Amount * PVIF ( rate, years )

Q: Assume you win a lottery, and you are offered the following stream of payments by the lottery…

A: Future value of cash flows will be reflective of the value of cash flows in the future after…

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: If the guaran

A: The amount to be paid for the policy can be computed as follows :

Q: Larry's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: The investment that pays a fixed sum till eternity is called a perpetuity. The value of perpetuity…

Q: Suppose you are in charge of annuities for a life insurance company. A customer comes in and wants…

A: Annuity amount =1,000,000 Lets assume Remaining Life =55 years Life in months =660 Interest rate 7%…

Q: To retire at a decent age and move to Hawaii, an engineer plans to trust her account to an…

A: Excel Spreadsheet: Excel Workings:

Q: Consider the following situation, which requires comparison of options.Cousin Thaddeus offers to pay…

A: Annuities are insurance contracts that promise to pay you regular income either immediately or in…

Q: You want to buy a house within 3 years, and you are currently saving for the down payment. You plan…

A: The question is based on the concept of calculating the future value of a periodic deposit with a…

Q: How many years would it take save an adequate amount for retirement if he deposits $2,100 per month…

A: A study that proves that the 1value of money today is higher than the future value of money is term…

Q: Moe's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs…

A: Given details are : Annual cash flow for forever = $15000 Required return = 9% We need to compute…

Q: Cury's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: In this problem we need to calculate the amount we need to pay for the policy. Investment policy pay…

Q: If you invest £150 at 4% for 11 years how much money would you have at the end of the investment…

A: Future Value of ordinary annuity=Annuity×1+ratetime-1rate Present Value Annuity…

Q: The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and…

A: Annual payment = $35000 Interest rate = 4.7%

Q: Larry's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: The cash flows that are started immediately after the investment and go on for an infinite time…

Q: The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and…

Q: Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: In this case we need to compute the value of policy today. Insurance company will pay $34000 per…

Q: You are considering a safe investment opportunity that requires a $780 investment today, and will…

A: Investment (X) = $780 Payment after 2 years (P2) = $870 Payment after 5 years (P5) = $640 Let r =…

Q: Your client is 26 years old. She wants to begin saving for retirement, with the first payment to…

Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $7,100 of…

A: Immediate annuity payments are brought by investors by paying company in lump sum. Formula for…

Q: You want to buy a house within 3 years, and you are currently saving for the down payment. You plan…

A: The calculation of the future value of the annuity with a 15% annual growth rate is as follows:

Q: Your uncle is about to retire, and he wants to buy an annuity that will provide him with $5,300 of…

A: The today’s cost can be calculated using the PV function of excel. Inputs of the PV function will…

Q: Your client is 32 years old. She wants to begin saving for retirement, with the first payment to…

Q: Suppose an investment will pay $7,000 in 44 years from now. If you can earn 6.15% interest…

A: Formulas: Present value = Future value / (1+rate)^years

Q: Assume that you just inherited an annuity that Will pay you 10,000 per year, with the first payment…

A: Present value of perpetuity = Annuity amount /rate of return 60,000 = 10,000 / rate of return Rate…

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: Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: Present value of a perpetuity P at an interest rate of r = P / r

Q: You will deposit $30,000 per year into an account beginning today that pays 13 percent per year.…

A: Annual Deposit = 30,000 beginning of period deposits Interest Rate = 13% Future Value Required =…

Q: Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your…

A: Present Value: The term present value is defined as the current or present day’s value of the amount…

Q: Your insurance agent is trying to sell you an annuity that costs $50,000 today. By buying this…

A: In finance annuity refers to that series of payments that are made/received at regular intervals.…

Q: Suppose you are committed to owning a $150,000 Ferrari. Required: If you believe your mutual fund…

A: Sum required in future, FV = $ 150,000Annual rate of return, r = 10.25%Number of periods = n = 10

Q: You want to buy a house within 3 years, and you are currently saving for the down payment. You plan…

A: Future value is the value of present cashflow at future date compounded at the specified rate.…

Q: Suppose you are committed to owning a $343,000 Ferrari. If you believe your mutual fund can achieve…

A: Discounting is a technique which is used to compute the present value (PV) of future amounts by…

Q: You believe you will spend $48,000 a year for 12 years once you retire in 24 years. If the interest…

A: First we need to find present value of our cash requirement at the time of retirement then we use…

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: You believe you will need to have saved $510,000 by the time you retire in 30 years in order to live…

A: PMT function is used to calculate yearly savings

Question

100%

The Maybe Pay Life Insurance Company is trying to sell you an investment policy that will pay you and your heirs $30,000 per year forever. If the required return on this investment is 5.6 percent, how much will you pay for the policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

If you invest $15,000 today, how much will you have in (for further instructions on future value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%
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?
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 $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.
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