EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103145947
Author: DeMarzo
Publisher: PEARSON
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Question
Chapter 4, Problem 7P
a)
Summary Introduction
To determine: The balance in the account after 3 years and the balance that corresponds to “interest on interest”.
Introduction:
The value that is calculated after accumulating the interest for a number of periods is known as the
b)
Summary Introduction
To determine: The balance in the account after 25 years and the balance that corresponds to “interest on interest”.
Introduction:
The value that is calculated after accumulating the interest for a number of periods is known as the future value. The future value of the cash stream is the future value of every cash flow.
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Students have asked these similar questions
Suppose you invest $1,200 in an account paying 4% interest per year.
a. What is the balance in the account after 2 years? How much of this balance corresponds to "interest on interest"? b. What is the balance in the account after 25 years? How much of this balance corresponds to "interest on interest"?
Suppose you invest $1,100 in an account paying 5% interest per year.
What is the balance in the account after 4 years? How much of this balance corresponds to "interest on interest"? What is the balance in the account after 30 years? How much of this balance corresponds to "interest on interest"?
(Round to the nearest cent.)
Suppose you need to have $57,942.00 in an account 25.00 years from today and that the account pays 11.00%. How much do you have to deposit into the account 5.00 years from today?
Suppose you deposit $1,101.00 into an account 7.00 years from today. Exactly 15.00 years from today the account is worth $1,466.00. What was the account's interest rate?
Suppose you deposit $1,093.00 into an account 7.00 years from today that earns 12.00%. It will be worth $1,613.00 _____ years from today.
Assume the real rate of interest is 2.00% and the inflation rate is 4.00%. What is the value today of receiving 10,528.00 in 15.00 years?
Chapter 4 Solutions
EBK CORPORATE FINANCE
Ch. 4.1 - Prob. 1CCCh. 4.1 - Prob. 2CCCh. 4.2 - Prob. 1CCCh. 4.2 - Prob. 2CCCh. 4.2 - Prob. 3CCCh. 4.3 - Prob. 1CCCh. 4.3 - Prob. 2CCCh. 4.4 - Prob. 1CCCh. 4.4 - What benefit does a firm receive when it accepts a...Ch. 4.5 - How do you calculate the present value of a a....
Ch. 4.5 - How are the formulas for the present value of a...Ch. 4.6 - Prob. 1CCCh. 4.6 - Prob. 2CCCh. 4.7 - Prob. 1CCCh. 4.7 - Prob. 2CCCh. 4.8 - Prob. 1CCCh. 4.8 - Prob. 2CCCh. 4.9 - Prob. 1CCCh. 4.9 - Prob. 2CCCh. 4.A - Your grandmother bought an annuity from Rock Solid...Ch. 4.A - Prob. A.2PCh. 4 - You have just taken out a five-year loan from a...Ch. 4 - Prob. 2PCh. 4 - Calculate the future value of 2000 in a. Five...Ch. 4 - Prob. 4PCh. 4 - Your brother has offered to give you either 5000...Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Your daughters currently eight years old. You...Ch. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Suppose you receive 100 at the end of each year...Ch. 4 - You have just received a windfall from an...Ch. 4 - You have a loan outstanding. It requires making...Ch. 4 - You have been offered a unique investment...Ch. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - How would your answer to Problem 16 change if the...Ch. 4 - The British government has a consol bond...Ch. 4 - What is the present value of 1000 paid at the end...Ch. 4 - You are head of the Schwartz Family Endowment for...Ch. 4 - When you purchased your house, you took out a...Ch. 4 - Prob. 22PCh. 4 - Your grandmother has been putting 1000 into a...Ch. 4 - A rich relative has bequeathed you a growing...Ch. 4 - Prob. 25PCh. 4 - You work for a pharmaceutical company that has...Ch. 4 - Your oldest daughter is about to start...Ch. 4 - A rich aunt has promised you 5000 one year from...Ch. 4 - You are running a hot Internet company. Analysts...Ch. 4 - Prob. 30PCh. 4 - Prob. 32PCh. 4 - Your firm spends 5000 every month on printing and...Ch. 4 - You have just entered an MBA program and have...Ch. 4 - Your credit card charges an interest rate of 2%...Ch. 4 - You have decided to buy a perpetuity. The bond...Ch. 4 - You are thinking of purchasing a house. The house...Ch. 4 - You would like to buy the house and take the...Ch. 4 - You have just made an offer on a new home and are...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - You are saving for retirement. To live...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - You are shopping for a car and read the following...Ch. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - The Tillamook County Creamery Association...
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Similar questions
- 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?arrow_forwardYou 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.arrow_forwardYou put $600 in the bank for 3 years at 15%. 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 third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.arrow_forward
- Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?arrow_forwardSuppose you invest $1,250 in an account paying 8% interest per year. a. What is the balance in the account after 3years? How much of this balance corresponds to "interest on interest"? b. What is the balance in the account after 31 years? How much of this balance corresponds to "interest on interest"?arrow_forwardSuppose you invest $850 in an account paying 5% interest per year. a. What is the balance in the account after 2 years? How much of this balance corresponds to "interest on interest"? b. What is the balance in the account after 29 years? How much of this balance corresponds to "interest on interest"? a. What is the balance in the account after 2 years? The balance in the account after 2 years is $ (Round to the nearest cent.)arrow_forward
- Suppose you invest $103 nin a bank account, and five years later it has grown to $137.91. a. What APR did you receive, if the interest was compounded semiannually? b. What APR did you receive if the interest was compounded monthly?arrow_forwardSuppose you deposit $1,500.00 into and account 7.00 years from today into an account that earns 14.00%. How much will the account be worth 14.00 years from today?arrow_forwardSuppose you deposit $1,098.00 into an account 5.00 years from today. Exactly 14.00 years from today the account is worth $1,577.00. What was the account's interest rate?arrow_forward
- Suppose you have $1500 in your savings account at the end of a certain period of time. You invested $1100 at a 5.37% simple annual interest rate. How long, in years, was your money invested?arrow_forwardSuppose you invest S11.570.00 into an account earming an interest rate of 2.484% compounded continuously for 2 yeart and thereafter earning an interest rate of 3.417% compounded weekly. How much money is in the account after 9 years? The amount in the account is (Note: Your answer should have a dollar sign and be accurate to two decimal places)arrow_forwardConsider a $1,000 deposit earning 7 percent interest per year for six years. What is the future value? How much total interest is earned on the original deposit? How much is interest earned on interest?arrow_forward
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