Concept explainers
a)
To compute: The
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
b)
To compute: The future value for 10 years at 10%.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
c)
To compute: The future value for 20 years at 5%.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
d)
To discuss: The reason why interest earned in (c) isn’t twice of (a).
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
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CORPORATE FINANCE - LL+CONNECT ACCESS
- 4.2 Calculating Future Values Compute the future value of $1,250 compounded annually fora. 10 years at 5 percent.b. 10 years at 10 percent.c. 20 years at 5 percent.d. Why is the interest earned in part (c) not twice the amount earned in part (c) not the twice the amount earned in part (a)?arrow_forward(Present value) What is the present value of the following future amounts? a. $900 to be received 10 years from now discounted back to the present at 11 percent. b. $300 to be received 6 years from now discounted back to the present at 8 percent. c. $1,150 to be received 11 years from now discounted back to the present at 5 percent. d. $1,100 to be received 4 years from now discounted back to the present at 19 percent. a. What is the present value of $900 to be received 10 years from now discounted back to the present at 11 percent? $nothing (Round to the nearest cent.)arrow_forwardWhat is the present value of $25,000 to be recieved in 15 years at a (a) 6.2 percent rate and (b) 9.6 percent rate? Explain why the present value is lower when the interest rate is higher?arrow_forward
- The present value of an annuity stream of $100 per year is $920 when valued at a 10% rate. By approximately how much would the value change if these were annuities due? A. An increase of $10 B. An increase of $92 C. An increase of $100 D. Unknown without knowing number of paymentsarrow_forwardQuestion 1 What is the future value of $650 deposited for one year earning an 10 percent interest rate annually? (Do not round intermediate calculations. Enter your answer as a whole number.) Future valuearrow_forwardCalculate the present value (principal) and the compound interest (in $). Use Table 11-2. Round your answers to the nearest cent. Nominal Rate (%) Compound Term of Interest Present Compound Amount Investment Compounded Value Interest $200,000 10 years 4 annually $ Need Help? Read Itarrow_forward
- Q. No. 02: Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. a) $300 per year for 10 years at 10% b) $100 per year for 5 years at 5% c) $300 per year for 5 years at 0% d) Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. Q.No. 03: Solve following time line, draw a clear diagram in your answer sheet. Assume opportunity cost of 12% 6 7 3 500 500 500 300 300 300 300 300 Q. No. 04: Discuss following terms with examples; a) Perpetuity b) Par Value c) Coupon Rate d) Zero-Coupon Bondarrow_forwardSuppose you invest $1,400 for seven years at an annual percentage rate of 8 percent. a. What is the future value if interest is compounded annually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the future value if interest is compounded semiannually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the future value if interest is compounded monthly? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the future value if interest is compounded continuously? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Future value b. Future value C. Future value d. Future value ( Prev 5 of 10 Nextarrow_forward1. Calculate the future value of $500 deposited today at a fixed rate of interest equal to 3.5% per year and left alone for: (Show the formula used to calculate the answers!) a. 5 years b. 10 years c. 15 years d. 20 yearsarrow_forward
- Complete the following using compound future value. (Round your answers to the nearest cent.) Time Principal Rate Compounded Amount Interest 15 years $16,300 2 % ? Annually ? Compounded ______________ ? Interest _________________ ?arrow_forwardFind the future value if $7000 is invested for 6 years at 11% compounded annually. (Round your answer to the nearest cent.) $ Need Help? DETAILS MY NOTES What is the future value if $8200 is invested for 15 years at 10% compounded semiannually? (Round your answer to the nearest cent.) Need Help? Read It ASK Warrow_forwardWhat is the equivalent present value of the following series of payments: ₱ 5,000 the first year, ₱ 5,500 the second year, and ₱ 6,000 the third year? The interest rate is 8%, compounded annually. a. ₱ 15,904.22 b. ₱ 13,590.43 c. ₱ 12,573.90 d. ₱ 14,107.99arrow_forward
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