FUND OF CORP FIN >CUSTOM<
11th Edition
ISBN: 9781308616384
Author: Ross
Publisher: MCG/CREATE
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Chapter 6, Problem 24QP
Calculating
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4.13 Calculating Annuity Present Value An investment offers $5,200 per year for 15 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever?
Interest rate with
annuity.
What are you getting in terms of interest rate if you are willing to pay
$10,000
today for an annual stream of payments of
$2,300
for the next
10
years? The next
20
years? The next
50
years? Forever?
What are you getting in terms of interest rate if you are willing to pay
$10,000
today for an annual stream of payments of
$2,300
for the next
10
years?
nothing%
(Round to two decimal places.)
What are you getting in terms of interest rate if you are willing to pay
$10,000
today for an annual stream of payments of
$2,300
for the next
20
years?
nothing%
(Round to two decimal places.)
What are you getting in terms of interest rate if you are willing to pay
$10,000
today for an annual stream of payments of
$2,300
for the next
50
years?
nothing%
(Round to two decimal places.)
What are you getting in terms of interest rate if you are willing to pay
$10,000
today for an annual stream of payments of
$2,300
forever?
nothing%…
Q1 a) you want to buy an ordinary annuity that will pay you $4,000 a year for the next 20 years. You expect annual interest rates will be 8 percent over that time period. What is maximum price you would willing to pay for the annuity
b) Find the future value of amount 100 if interest rate is 10% and number of years is 10
Chapter 6 Solutions
FUND OF CORP FIN >CUSTOM<
Ch. 6.1 - Prob. 6.1ACQCh. 6.1 - Prob. 6.1BCQCh. 6.1 - Unless we are explicitly told otherwise, what do...Ch. 6.2 - In general, what is the present value of an...Ch. 6.2 - In general, what is the present value of a...Ch. 6.3 - If an interest rate is given as 12 percent...Ch. 6.3 - What is an APR? What is an EAR? Are they the same...Ch. 6.3 - Prob. 6.3CCQCh. 6.3 - What does continuous compounding mean?Ch. 6.4 - What is a pure discount loan? An interest-only...
Ch. 6.4 - What does it mean to amortize a loan?Ch. 6.4 - Prob. 6.4CCQCh. 6 - Two years ago, you opened an investment account...Ch. 6 - A stream of equal payments that occur at the...Ch. 6 - Your credit card charges interest of 1.2 percent...Ch. 6 - What type of loan is repaid in a single lump sum?Ch. 6 - Annuity Factors [LO1] There are four pieces to an...Ch. 6 - Prob. 2CRCTCh. 6 - Prob. 3CRCTCh. 6 - Present Value [LO1] What do you think about the...Ch. 6 - Prob. 5CRCTCh. 6 - Prob. 6CRCTCh. 6 - APR and EAR [LO4] Should lending laws be changed...Ch. 6 - Prob. 8CRCTCh. 6 - Prob. 9CRCTCh. 6 - Prob. 10CRCTCh. 6 - Prob. 11CRCTCh. 6 - Prob. 12CRCTCh. 6 - Prob. 1QPCh. 6 - Prob. 2QPCh. 6 - Prob. 3QPCh. 6 - Prob. 4QPCh. 6 - Calculating Annuity Cash Flows [LO1] If you put up...Ch. 6 - Calculating Annuity Values [LO1] Your company will...Ch. 6 - Calculating Annuity Values [LO1] If you deposit...Ch. 6 - Calculating Annuity Values [LO1] You want to have...Ch. 6 - Prob. 9QPCh. 6 - Calculating Perpetuity Values [LO1] The Maybe Pay...Ch. 6 - Prob. 11QPCh. 6 - Prob. 12QPCh. 6 - Calculating APR [LO4] Find the APR, or stated...Ch. 6 - Calculating EAR [LO4] First National Bank charges...Ch. 6 - Prob. 15QPCh. 6 - Prob. 16QPCh. 6 - Prob. 17QPCh. 6 - Calculating Present Values [LO1] An investment...Ch. 6 - EAR versus APR [LO4] Big Doms Pawn Shop charges an...Ch. 6 - Prob. 20QPCh. 6 - Calculating Number of Periods [LO3] One of your...Ch. 6 - Calculating EAR [LO4] Friendlys Quick Loans, Inc.,...Ch. 6 - Prob. 23QPCh. 6 - Calculating Annuity Future Values [LO1] You are...Ch. 6 - Calculating Annuity Future Values [LO1] In the...Ch. 6 - Prob. 26QPCh. 6 - Prob. 27QPCh. 6 - Prob. 28QPCh. 6 - Simple Interest versus Compound Interest [LO4]...Ch. 6 - Prob. 30QPCh. 6 - Prob. 31QPCh. 6 - Prob. 32QPCh. 6 - Calculating Future Values [LO1] You have an...Ch. 6 - Calculating Annuity Payments [LO1] You want to be...Ch. 6 - Prob. 35QPCh. 6 - Prob. 36QPCh. 6 - Prob. 37QPCh. 6 - Growing Annuity [LO1] Your job pays you only once...Ch. 6 - Prob. 39QPCh. 6 - Calculating the Number of Payments [LO2] Youre...Ch. 6 - Prob. 41QPCh. 6 - Prob. 42QPCh. 6 - Prob. 43QPCh. 6 - Prob. 44QPCh. 6 - Prob. 45QPCh. 6 - Prob. 46QPCh. 6 - Prob. 47QPCh. 6 - Prob. 48QPCh. 6 - Prob. 49QPCh. 6 - Calculating Present Value of a Perpetuity [LO1]...Ch. 6 - Prob. 51QPCh. 6 - Prob. 52QPCh. 6 - Calculating Annuities Due [LO1] Suppose you are...Ch. 6 - Prob. 54QPCh. 6 - Prob. 55QPCh. 6 - Prob. 56QPCh. 6 - Prob. 57QPCh. 6 - Prob. 58QPCh. 6 - Prob. 59QPCh. 6 - Prob. 60QPCh. 6 - Calculating Annuity Values [LO1] You are serving...Ch. 6 - Prob. 62QPCh. 6 - Calculating EAR with Points [LO4] The interest...Ch. 6 - Prob. 64QPCh. 6 - Prob. 65QPCh. 6 - Prob. 66QPCh. 6 - Prob. 67QPCh. 6 - Calculating Annuity Payments [LO1] This is a...Ch. 6 - Prob. 69QPCh. 6 - Prob. 70QPCh. 6 - Prob. 71QPCh. 6 - Calculating Interest Rates [LO4] A financial...Ch. 6 - Prob. 73QPCh. 6 - Prob. 74QPCh. 6 - Ordinary Annuities and Annuities Due [LO1] As...Ch. 6 - Calculating Growing Annuities [LO1] You have 40...Ch. 6 - Prob. 77QPCh. 6 - Prob. 78QPCh. 6 - Prob. 79QPCh. 6 - Prob. 80QPCh. 6 - Prob. 1MCh. 6 - Prob. 2MCh. 6 - Prob. 3MCh. 6 - Prob. 4MCh. 6 - Prob. 5MCh. 6 - Prob. 6M
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Question 8 Suppose a 65-year-old is contemplating retirement, expects to live for another 20 years, has a GHȼ1 million nest egg, expects the investments to earn a nominal annual rate of 6%, expects inflation to average 3% per year, and wants to withdraw a constant real amount annually over the next 20 years so as to maintain a constant standard of living. If the first withdrawal is to be made today, what is the amount of that initial withdrawal?arrow_forward2. Which of the following alternatives would you rather receive, assuming an interest rate of 8% per year? Alternative 1: Receive $100 today: Alternative 2: Receive $120 two years from nowarrow_forward5. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year An annuity that pays $1,000 at the end of each year An annuity that pays $500 at the beginning of every six months You bought an annuity selling at $17,390.08 today that promises to make equal payments at the beginning of each year for the next eight years (N). If the annuity’s appropriate interest rate (I) remains at 5.00% during this time, then the value of the annual annuity payment (PMT) is . You just won the lottery. Congratulations! The jackpot is $60,000,000, paid in eight…arrow_forward
- You plan to invest $19,000 per year into a retirement account. If you earn a compound annual rate of return of 8%, how many years will it take you to reach a balance of $1,000,000? Question 10 options: 18.98 22.26 20.16 17.54 21.45arrow_forwardYou can invest funds at 5.9% (APR). You are considering buying an annuity and are comparing two alternatives. Both of these are 10 years in length, with the same number of monthly payments (to you) oof $4748. The first instrument pays at the "end" of the month while the second pays at the "beginning" of the month. You believe that the second alternative must be worth more as the money coomes to you faster, but how much more is it worth to you?arrow_forwardquestion 10 Assume that you contribute $230 per month to a retirement plan for 20 years. Then you are able to increase the contribution to $460 per month for another 30 years. Given a 7.2 percent interest rate, what is the value of your retirement plan after the 50 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) FUTURE VALUE OF MULTIPLE ANNUITIES?arrow_forward
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What is an Annuity? Are Annuities a Good Investment? Basics of an Annuity, a Whiteboard Animation; Author: Learn to invest;https://www.youtube.com/watch?v=Wq7nq8Gx78w;License: Standard YouTube License, CC-BY