EBK CORPORATE FINANCE
11th Edition
ISBN: 8220102798878
Author: Ross
Publisher: YUZU
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Chapter 4, Problem 53QP
Summary Introduction
To compute: The
It refers to the value of an amount today after taking the
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Part A:
By the end of this year, you would be 35 years old and you want to plan for your retirement. You wish to retire at the age of 65 and you expect to live 20 years after retirement. Upon retirement, you wish to have an annual sum of $50,000 to supplement your social security benefits. Therefore, you opened now your retirement account with a 7% annual interest rate. At retirement, you liquidate your account and use the funds to buy an investment-grade bond which makes $50,000 annual coupon payments based on a 6 % coupon rate, throughout your retirement years.
How much will the face value of the bond that you will be investing? Please calculate the monthly payment in your retirement account in order to be able to achieve the plan mentioned above?
How much will your inheritors receive?
Answer with steps: You receive $4,000 from your aunt when you turn 21 and you immediately invest the money in a saving account. The account earns 12% annual rate, with continuous compounding. You get your first job after 5 years. You want to retire from work in 20 years. If you deposit $100 into your account every month for the first 10 years, and $200 every month for the next 10, how much will you have after 20 years? Assume you continue to earn 12% annual rate with continuous compounding.
Finance
Lisa plans to invest $300 each month for the next 17 years in a 529 account for Zach starting next month. Lisa will also put an additional $4,000 away at the end of year 10. If the account earns 8% compounded monthly, how much will be in Zach’s 529 in 17 in years?
Chapter 4 Solutions
EBK CORPORATE FINANCE
Ch. 4 - Prob. 1CQCh. 4 - Prob. 2CQCh. 4 - Prob. 3CQCh. 4 - Prob. 4CQCh. 4 - Time Value On subsidized Stafford loans, a common...Ch. 4 - Prob. 6CQCh. 4 - Prob. 7CQCh. 4 - Prob. 8CQCh. 4 - Prob. 9CQCh. 4 - Prob. 10CQ
Ch. 4 - Simple Interest versus Compound Interest First...Ch. 4 - Prob. 2QPCh. 4 - Prob. 3QPCh. 4 - Prob. 4QPCh. 4 - Prob. 5QPCh. 4 - Prob. 6QPCh. 4 - Calculating Present Values Imprudential, Inc., has...Ch. 4 - Calculating Rates of Return Although appealing to...Ch. 4 - Perpetuities An investor purchasing a British...Ch. 4 - Prob. 10QPCh. 4 - Prob. 11QPCh. 4 - Prob. 12QPCh. 4 - Calculating Annuity Present Value An investment...Ch. 4 - Calculating Perpetuity Values The Perpetual Life...Ch. 4 - Calculating EAR Find the EAR in each of the...Ch. 4 - Calculating APR Find the APR, in each of the...Ch. 4 - Calculating EAR First National Bank charges 10.3...Ch. 4 - Interest Rates Well-known financial writer Andrew...Ch. 4 - Calculating Number of Periods One of your...Ch. 4 - Prob. 20QPCh. 4 - Prob. 21QPCh. 4 - Simple Interest versus Compound Interest First...Ch. 4 - Calculating Annuities You are planning to save for...Ch. 4 - Prob. 24QPCh. 4 - Prob. 25QPCh. 4 - Prob. 26QPCh. 4 - Prob. 27QPCh. 4 - Annuity Present Values What is the present value...Ch. 4 - Annuity Present Values What is the value today of...Ch. 4 - Balloon Payments Audrey Sanborn has just arranged...Ch. 4 - Prob. 31QPCh. 4 - Prob. 32QPCh. 4 - Growing Annuity Southern California Publishing...Ch. 4 - Growing Annuity Your job pays you only once a year...Ch. 4 - Prob. 35QPCh. 4 - Prob. 36QPCh. 4 - Prob. 37QPCh. 4 - Calculating Loan Payments You need a 30-year,...Ch. 4 - Prob. 39QPCh. 4 - Calculating Present Values You just won the TVM...Ch. 4 - Prob. 41QPCh. 4 - Prob. 42QPCh. 4 - Prob. 43QPCh. 4 - Prob. 44QPCh. 4 - Prob. 45QPCh. 4 - Prob. 46QPCh. 4 - Prob. 47QPCh. 4 - Prob. 48QPCh. 4 - Prob. 49QPCh. 4 - Prob. 50QPCh. 4 - Calculating Annuities Due You want to lease a set...Ch. 4 - Prob. 52QPCh. 4 - Prob. 53QPCh. 4 - Prob. 54QPCh. 4 - Prob. 55QPCh. 4 - Prob. 56QPCh. 4 - Prob. 57QPCh. 4 - Prob. 58QPCh. 4 - Prob. 59QPCh. 4 - Prob. 60QPCh. 4 - Prob. 61QPCh. 4 - Prob. 62QPCh. 4 - Prob. 63QPCh. 4 - Prob. 64QPCh. 4 - Calculating the Number of Periods Your Christmas...Ch. 4 - Prob. 66QPCh. 4 - Prob. 67QPCh. 4 - Prob. 68QPCh. 4 - Prob. 69QPCh. 4 - Perpetual Cash Flows What is the value of an...Ch. 4 - Prob. 71QPCh. 4 - Prob. 72QPCh. 4 - Prob. 73QPCh. 4 - Prob. 74QPCh. 4 - Rule or 69.3 A corollary to the Rule of 72 is the...Ch. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MCCh. 4 - Prob. 5MCCh. 4 - Prob. 6MC
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- Part A: By the end of this year, you will be 35-years old, and you want to plan for your retirement. You wish to retire at the age of 65, and you expect to live 20 years after retirement. Upon retirement you wish to have an annual sum of $50,000 to supplement your social security benefits. Therefore, you opened your retirement account with a 7% annual interest rate. At retirement you liquidate your account and use the funds to buy an investment grade bond which makes $50,000 annual coupon payments based on a 6 % coupon rate throughout your retirement years. What is the face value, not the actual value, of the bond that you will be investing in? Please calculate the monthly payment in your retirement account in order to be able to achieve the plan mentioned above. How much will your inheritors receive?arrow_forwardPayments of Ordinary Annuities Ryan wants to get together $40 000 to purchase the first house in his housing empire. He does the math, and he begins making regular quarterly deposits into a savings account that earns 8.5%, compounded quarterly, for 5 years. What must his regular deposits be in order to achieve his goal of saving $40 000 in 5 years?arrow_forwardAfter completing your Bachelor of Business (Accounting) degree, suppose you secure a permanent position as an accountant. You drafted a financial plan to retire in 30 years from now. So, you are thinking about creating a fund that will allow you to receive $40,000 at the end of each year for 25 years after your retirement. The interest rates are expected to be 2.25% per annum during the 30year pre- retirement period and 1.75% during the retirement period. Required: a) To provide the 25- year, $40,000 a year annuity, calculate how much should be in the fund account when you retire in 30 years. b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn 2.35% per year during the 30 years preceding your retirement?c) What effect would a change (increase/decrease) in the interest rates, both during and prior to retirement, have on the values calculated in parts (a) and (b)? Explain why. d) (Using different interest rates) Assume that the…arrow_forward
- You just accepted an offer from XYZ Petrochemical Company in Louisiana. As a sign up bonus, the XYZ will deposit $10,000 in a retirement account for you which generates 12% return annually. In addition, the company deposits $5,000 every year in the same account, if you stays with XYZ. How much money will be accumulated in this account if you decide to retire 40 years from now?arrow_forwardA new employee plans to receive 760,000 TL individual retirement bonus when he retires. According to the forecast that this person will retire after 30 years, premium payments will be made at the end of each year and a compound interest rate of 14% will be applied each year; a) What is the premium amount to be deposited at the end of each year b) Draw the cash flow diagram for the transactions. c) Calculate the present value of the 760,000 TL bonus that this person will receive when she retires.arrow_forwardSally Hamilton has performed well as the chief financial officer of the Maxtech Computer Company and has earned a bonus. She has a choice among the following three bonus plans: 1. A $50,000 cash bonus paid now. 2. A $10,000 annual cash bonus to be paid each year over the next six years, with the first $10,000 paid now. 3. A three-year $22,000 annual cash bonus with the first payment due three years from now. Required: Evaluate the three alternative bonus plans. Sally can earn a 6% annual return on her investments.arrow_forward
- You have $11,489.64 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $200,000. You expect to earn 11% annually on the account. How many years will it take to reach your goal? Round your answer to the nearest whole number. _____ yearsarrow_forwardFuture value of an ordinary annuity: Cecelia Thomas is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $3,000 every year in an IRA account, beginning at the end of this year until she reaches the age of 65. If the IRA investment will earn 9.75 percent annually, how much will she have in 40 years, when she turns 65? Please use Excel to solvearrow_forward#1 O Derek will deposit $7,257.00 per year for 30.00 years into an account that earns 15.00%, The first deposit is made next year. How much will be in the account 41.00 years from today? Submitarrow_forward
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