Explanation The present value of winnings using an interest rate of 10% will be not more than the present value of winnings using an interest rate of 6% because the winnings are affected by the greater interest rate. The present value of winnings using an interest rate of 10% is $36,867,420 ( $6,000,000 × 6

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ISBN: 9781337272094

Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

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Question

Chapter 14, Problem 14.20EX

To determine

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To determine: The increase or decrease in present value of winnings using an interest rate of 10% and 6%.

Expert Solution & Answer

Chapter 14 Solutions

Accounting

Ch. 14 - Describe the two distinct obligations incurred by...Ch. 14 - Explain the meaning of each of the following terms...Ch. 14 - If you asked your broker to buy you a 12% bond...Ch. 14 - Prob. 4DQ Ch. 14 - If bonds issued by a corporation are sold at...Ch. 14 - The following data relate to a 2,000,000, 8% bond...Ch. 14 - Bonds Payable has a balance of 5,000,000, and...Ch. 14 - What is a mortgage note?Ch. 14 - Fleeson Company needs additional funds to purchase...Ch. 14 - In what section of the balance sheet would a bond...

Ch. 14 - Alternative financing plans Frey co. is...Ch. 14 - Alternative financing plans Brower co. is...Ch. 14 - Issuing bonds at face amount On January 1, the...Ch. 14 - Issuing bonds at face amount On January 1, the...Ch. 14 - Prob. 14.3APE Ch. 14 - Issuing bonds at a discount On the first day of...Ch. 14 - Prob. 14.4APE Ch. 14 - Prob. 14.4BPE Ch. 14 - Prob. 14.5APE Ch. 14 - Prob. 14.5BPE Ch. 14 - Prob. 14.6APE Ch. 14 - Prob. 14.6BPE Ch. 14 - A Redemption of bonds payable A 1,500,000 bond...Ch. 14 - Redemption of bonds payable A 1,200,000 bond issue...Ch. 14 - Journalizing installment notes On the first day of...Ch. 14 - Journalizing installment notes On the first day of...Ch. 14 - Times interest earned Berry Company reported the...Ch. 14 - Times interest earned Aver ill Products Inc....Ch. 14 - Prob. 14.1EX Ch. 14 - Prob. 14.2EX Ch. 14 - Prob. 14.3EX Ch. 14 - Bond price Stone Energy Corporation's 7.5% bonds...Ch. 14 - Entries for issuing bonds Thomson Co. products and...Ch. 14 - Prob. 14.6EX Ch. 14 - Prob. 14.7EX Ch. 14 - Prob. 14.8EX Ch. 14 - Entries for issuing and calling bonds; gain Emil...Ch. 14 - Entries for installment note transactions On the...Ch. 14 - Entries for installment note transactions On...Ch. 14 - Entries for installment note transactions On...Ch. 14 - Reporting bonds At the beginning of the current...Ch. 14 - Times interest earned The following data were...Ch. 14 - Times interest earned Loomis, Inc. reported the...Ch. 14 - Times interest earned lacouva Company reported the...Ch. 14 - Present value of amounts due Tommy John is going...Ch. 14 - Prob. 14.18EX Ch. 14 - Present value of an annuity On January 1, you win...Ch. 14 - Prob. 14.20EX Ch. 14 - Prob. 14.21EX Ch. 14 - Present value of bonds payable; premium Moss Co....Ch. 14 - Prob. 14.23EX Ch. 14 - Amortize premium by interest method Shunda...Ch. 14 - Prob. 14.25EX Ch. 14 - Prob. 14.26EX Ch. 14 - Prob. 14.1APR Ch. 14 - Bond discount, entries for bonds payable...Ch. 14 - Prob. 14.3APR Ch. 14 - Entries for bonds payable and installment note...Ch. 14 - Bond discount, entries for bonds payable...Ch. 14 - Prob. 14.6APR Ch. 14 - Effect of financing on earnings per share Three...Ch. 14 - Bond discount, entries for bonds payable...Ch. 14 - Bond premium, entries for bonds payable...Ch. 14 - Entries for bonds payable and installment note...Ch. 14 - Bond discount entries for bonds payable...Ch. 14 - Bond premium, entries for bonds payable...Ch. 14 - Prob. 14.1CP Ch. 14 - Prob. 14.3CP Ch. 14 - Prob. 14.4CP Ch. 14 - Prob. 14.5CP Ch. 14 - Prob. 14.6CP Ch. 14 - Times interest earned The following financial data...

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Similar questions

(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?
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

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