Lesson: Economic Equivalence By the age of 50, you wanted to be called a multi-millionaire. What amount should you deposit every end of the month so that you can expect ₱ 2,000,000.00 at that age. Assume you are 20 years old today and the bank offers 6%.
Q: 4. If a refrigerator is offered for sale at the amount of P 18,000.00 payable after 1 year. If you…
A: Given information, Future value: P 18,000.00 Interest rate: 8% Time period: 1 year To find:…
Q: How much money must you invest today in order to withdraw ₱ 12,156 annually for4 years if the…
A: The conception of present value asserts that a add of cash these days is price quite a add of cash…
Q: Find the present worth today in real value corresponding to the cur- rent values shown below for a 4…
A: Given that; Inflation rate = 4 % Interest rate = 4 % We subtract the inflation rate from the nominal…
Q: If you let your friend borrow Php 50,000 for an interest rate of 5% compounded continuously, when…
A: Given: Amount borrowed=Phop 50000 Interest rate=5% compounded continuously Accumulated amount=Php 1…
Q: f you deposit 500 pesos at the end of each year for 3 years into an annuity that pays 5% annual…
A: Given deposit at the end of year = 500 pesos Time = 3 years Simple interest rate = 5 %
Q: Robert wins $5,000,000 at the lottery; however, he is not going to receive the full prize…
A: To find the present value of future cash inflows, we discount the values of future cash inflows with…
Q: How much money must you invest today in order to withdraw ₱ 11,331 annually for 5 years if the…
A: Given the information: Annual withdrawal amount = 11331 Time = 5 years Interest rate = 1.98%
Q: For questions 3-4, consider the three sequences of incomes below ( P, Q, and R). Each sequence…
A: In economics, present value refers to the current value of a future stream of cash flows. Future…
Q: 30. A man loaned P15,000 pesos from a bank which offers a discount rate of 8% payable at once. How…
A: A loan is a sort of credit in which a sum of money is provided to another person in return for the…
Q: 10-year government coupon bond has a face value of $1,000 and a coupon rate of 5% paid annually.…
A: Time = 10 years Face value = 1000 $ Coupon rate = 5% or 50 $ annually Current rate = 6 % annually…
Q: Assume a consumer who has current period income y = 200 , future-period income y' = 150, current and…
A: A consumer financial plan is the real buying potential with which a consumer can buy a bunch of two…
Q: On his sixth birthday, the boy was left with inheritance. The inheritance will be paid in a lump sum…
A: In economics, present value refers to the current value of a future stream of cash flow. Future…
Q: If Charlie invests $50,000 in a cheese company today and is offered a 5% interest rate. How much…
A:
Q: H6. a. what is the present value of a two year income stream $10,000 in year 1 and $10,000 in year 2…
A: Present Value refers to the value of a series of income streams or series of cash payments…
Q: Assume an interest rate of 5%. What is the maximum amount an individual would be willing to give up…
A: Future value (F.V.) = $1 Interest rate (r) = 5% = 0.05% Number of years (n) = 30 years Present value…
Q: Find the Present Value (today) of $144 to be received in two years at the interest rate of 15%.
A: Given information, Future value (FV): $144 Interest rate (r): 15% Time period (n): 2 years To…
Q: You are considering taking out a two-year loan of$1,000 from a bank, on which you can pay…
A: Case 1 : Compound yearly interest Principal (P) = $1,000 Interest rate (r) = 1% Time period (t) = 2…
Q: is based on the notion that a dollar paid in the future is less valuable than a dollar paid today.…
A: The present value is the current value of all the future streams of money calculated at a particular…
Q: The future value of an annuity will increase if the interest rate goes up , but the present value of…
A: To find out the present value, we discount the future values with respect to the interest rate.
Q: 10. Suppose the interest rate is 5% and that you are to receive three annual payments of $10,000,…
A: The present value is an important financial concept popularly used by business firms and individuals…
Q: In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe.…
A: Here we calculate the future amount by using the formula which are as follow-
Q: An investment of x pesos is made at the end of each year for three years, at an interest rate of 9%…
A: Given, Amount = x Time = 3 year Interest rate = 9%
Q: What does the statement “interest rate 10%” signify? a The rate is effective per year. b The…
A: Effective Interest rate:- Effective interest rate can be explained as the actual return on the…
Q: Find the amount due at the end of 15 months if the present value is PHP 18,000 and if; the simple…
A: Given present value = 18000 PHP Time = 15 months Simple interest rate = 5 % annually Monthly rate =…
Q: Suppose you are considering working at a local coffee shop 5 nights a week. You expect to save $125…
A: * SOLUTION :- From the given information the calculation is given below
Q: Question 4 Max puts R30 000 down on a second-hand car and contracts to pay the balance in 24 monthly…
A: a) Down payment = 30,000 Monthly payment (P) = 4,000 n = 24 Interest rate = 24% per annum compounded…
Q: f you borrowed P10,000.00 from a bank with 18% interest per annum, what is the total amount to be…
A: Principle: 10,000 Interest: 18% Time: 5 years
Q: When you take your job, you decide to start saving for your retirement. You put $5,000/yr into the…
A: Monthly investment A= 5000 Rate of interest = 8% / year We have to calculate the amount of total…
Q: Suppose you want to have P 1 million saved by the time you reach age 50 and suppose that you are 20…
A: PV = FV(1+r)nwhere PV is present value FV is Future value r is interest rate n is time period
Q: Present value can be used to determine the fair price -or value - of a bond. In the examples that…
A: (a) Price of Zero Coupon Bond: Given that- Future value = $225 Current interest rate, r = 3% or…
Q: 3. You just inherited P1,000,000. While you plan to squander some of it away, how much should you…
A:
Q: Assume that the real interest rate is 10%. A firm can invest in a piece of machinery that will…
A: PV factor in year N = (1.10)N. PDV in year N = Cash flow in year N x PV factor in year N
Q: A man wants to make 14% nominal interest compounded semiannually on a bond investment. How much…
A: The interest rate before inflation is referred to as the nominal interest rate. If a loan's marketed…
Q: When you take your first job, you decide to start saving right away for your retirement. You put P…
A: Given, monthly payment= P 5000 Interest rate= 8% Time period= 35 years
Q: ndicate which one of following statements is true for a coupon bond: A) When the price of a bond…
A: a gift certificate from the bond's issue date until it matures, the annual interest payment is…
Q: Example 2: EOY NCF ($) 1 100 2 90 3 80 4 70 find the present value at 10% interest of the series of…
A: Given information: Cash flow of first-year = 100 Cash flow of subsequent year decreases by = 10…
Q: Suppose schmidt owns some land and is trying to decide when to sell it for a shopping center…
A: The interest rate is 5% on financial investment. (Please put in the complete information)If Schmidt…
Q: 2.2 (LG 2.2) What principal amount will yield $150 in interest at the end of three months when the…
A: Answer: Simple interest is the interest calculated only on the principal amount in all periods. It…
Q: Suppose you think if you were to retire right now, you would have needed $50,000 each year to…
A: The figures for the actual amount of money that inflation can cost seniors are staggering. The LIMRA…
Q: )You recently obtained a $135,000, 30-year mortgage with a nominal interest rate of 7.25 percent.…
A: The payments of mortgage are described as a summation of interest payments and the principal. For…
Q: How much is the exact simple interest of P 6000 from February 28, 2000 to December 31, 2001 with an…
A: a. Here, given information is: Present value (P)= P6000 Time period (t)= 22 months (672 in days)…
Q: Assume that a consumer's utility over two years is a function of consumption during the twe years.…
A: Utility function : U = ln C1 + B ln C2 Intertemporal Budget Constraint : C1 + C2/(1+R ) = Y1 +…
Q: What is the present value of $100 one year from now if the interest rate is 10%? What is the present…
A: Interest rate: It refers to the rate at which the debtor has to pay the amount with the interest…
Q: Joyce buys a television set from a merchant who asks P 18,750 at the end of 60 days (cash in 60…
A: Given information: Future value: P18,750 Time period: 0.167~ 2 months (approx) Interest rate: 8%…
Lesson: Economic Equivalence
By the age of 50, you wanted to be called a multi-millionaire. What amount should you deposit every end of the month so that you can expect ₱ 2,000,000.00 at that age. Assume you are 20 years old today and the bank offers 6%.
Step by step
Solved in 2 steps
- Suppose an individual places his money in a bank for a year then invests in apples for a year. Suppose the bank has an annual rate of 5%, compounded continuously. During the year in which the individual's money is in the bank, the apple grows in price from $1 to $1.25. Suppose its return doubles in the second year, when the individual's money is invested in the apples. He starts the first investment period with $100. How much money does he have after two years following the investment plan given above? Group of answer choices $105.1 $124.7 $154.4 $157.7Suppose schmidt owns some land and is trying to decide when to sell it for a shopping center development. Her goal is to maximize her net worth, the present value of her other income stream plus the value of the land or the value of investment made with the proceeds of selling the land. The land is now worth $100k if sold. Suppose that the value of the land is expeted to increase at a rate that will slowly decrease over time as she waits. A.) Suppose schmidt expects the land to be worth $104k next year. Should she sell it now? Why? B.) If she expects it to be worth $110k in a year, should she sell now, Why? C.) At what next year land value would Schmidt be indifferent between selling and holding a year?2. Suppose that you start a savings plan by depositing Php. 1,350 at the beginning of every year into an account that offers 9% per year. If you make the first deposit today, and then three additional ones, how much will have accumulated after four years?
- Economics In 54 months time you expect a cash flow of $3 million. Calculate it’s present value (PV) given the 54-month interest rate is currently 4%, with a volatility of 120 basis points (bps). Explain, using equations with properly-defined mathematical notation, how to map this cash flow to vertices at 4 years and 5 years, in such a way that the volatility of the present value of the mapped cash flow remains at 120 bps. Suppose the 4-year rate has a volatility of 110 bps and the 5-year rate has a volatility of 150 bps, and their correlation is 0.9. How much should be mapped to each vertex. Give your answer in PV terms and round your answers to whole $ values.Assume a consumer who has current period income y = 200 , future-period income y' = 150, current and future taxes t = 40 and t' = 50, respectively and faces a market real interest rate ofr 005, or 5% per period. The consumer would like to consume equal amounts in both periods, that is, he or she would like to set c = c', if possible. However, this consumer is a faced with a credit market imperfections, in that he or she cannot borrow at all, that is, s>or=20. (a) Show the consumer's lifetime budget constraint and indifference curves in a diagram. (b) Calculate his or her optimal current period and future-period consumption and optimal, saving, and show this in your diagram.Assume a consumer who has current period income y = 200 , future-period income y' = 150, current and future taxes t = 40 and t' = 50, respectively and faces a market real interest rate ofr 005, or 5% per period. The consumer would like to consume equal amounts in both periods, that is, he or she would like to set c = c', if possible. However, this consumer is a faced with a credit market imperfections, in that he or she cannot borrow at all, that is, s>or=20. (a) Show the consumer's lifetime budget constraint and indifference curves in a diagram. Calculate his or her optimal current period and future-period consumption and optimal, saving, and show this in your diagram. (b) Suppose that everything remains unchanged. except that now t = 20 and t' = 71. Calculate the effects on current and future con sumption and optimal saving, and show this in your diagram (d) Now, suppose alternatively that y = 100. Repeat parts (a) and (b), and explain any differences.
- Given an interest rate of 12%, how much does one need to invest today to acquire 5,000 pesos annually for 20 years?The interest rate is 6 percent a year and you expect to receive $1,000 next year and the following year. What is the present value of $1,000 to be received next year? What is the present value of $1,000 tobe received in two years? The present value of $1,000 to be received next year is $ ____. >>>>Answer to 2 decimal places.The interest rate is 6 percent a year and you expect to receive $1,000 next year and the following year. What is present value of $1,000 to be received in two years? The present value of $1,000 to be received in two years is $____ Answer to 2 decimal places Thanks!
- 10. What is the present value of a perpetuity of $100 if the appropriate discount rate is 7%? If interest rates in general were to double and the appropriate discount rate rose to 14%, what would happen to the present value of the perpetuity?Suppose a bank offers you the following two year, non-cashable GICs (i.e., withdrawals are not allowed). The first one pays a monthly rate of return 0.245%, the second one pays a semi-annual rate of return of 1.47% and the third one a return of 2.75% for the first year and 3.25% for the second year. All interest payments are reinvested.(a) Which investment would you prefer?(b) Suppose you expect that interest rates decline to 3% after the first year. How does your answer change, if the two year GIC pays out the first interest payment (but not the principal) at the end of the first year?10. Suppose the interest rate is 5% and that you are to receive three annual payments of $10,000, with the first payment one year from now, the second payment two years from now, and the third payment three years from now. What is the present value of this stream of payments?