FUND. OF CORPORATE FINANCE (LL)
11th Edition
ISBN: 9781260377811
Author: Ross
Publisher: MCG
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Chapter 6, Problem 34QP
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?
8. How much do you need to save at the end of each year to receive 100 million in 10 years? The interest rate is 10%
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?
Chapter 6 Solutions
FUND. OF CORPORATE FINANCE (LL)
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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- 11. How long does it take for your money to grow to ten times its original value if the interest rate of 6% per year? use excelarrow_forward2 a) Suppose you receive $10,000 and have an opportunity to earn a real rate of return of 10% (assume known and constant forever). Using the definition of income proposed by John Hicks, what is your annual sustainable income? In other words, what amount can you spend every year forever? b) What is the present value of an annual payment of $10,000 forever, assuming a 5% real discount rate? $9,523.80 $200,000 Infinite $10,000arrow_forward14. You are saving for retirement. To live comfortably, you decide you will need to save $3 million by the time you are 65. Today is your 20th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 10%, how much must you set aside each year to make sure that you will have $3 million in the account on your 65th birthday?\The amount to deposit each year is $______(Round to the nearest dollar.)arrow_forward
- 5. How much would you pay today for a perpetuity of $ 1,000 per year if the prevailing interest rate is 5.25%?arrow_forward6. You decide you want to start investing for your retirement and you want to have $650,000. If you save $100 a month in an account that averages a 10% annual rate of return, will you have enough money in 25 years? (Hint: this formula was introduced in Section 1)arrow_forward13. How long does it take for your money to grow to ten times its original value if the interest rate of 10% per year?arrow_forward
- 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%…arrow_forward20. A retiree wants level consumption in real terms over a 30-year retirement. If the inflation rate equals the interest rate she earns on her $450,000 of savings, how much can she spend in real terms each year over the rest of her life? (Round your answer to the nearest dollar.)arrow_forwardQ12: Suppose you are saving up to buy a holiday to Antarctica in five years that will cost you $10,000. If you are confident that your invested savings can earn 15% a year, how much would you need to invest today?arrow_forward
- Q8 You want to buy a $195,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan for the rest. a.how much is the loan amount going to be ?$____b.what will your monthly payments be if the interest rate is 5%? $____c.what will your monthly payments be if the interest rate is 6%? $____arrow_forwardJUST NEED SUBPARTS D AND E You are trying to decide how much to save for retirement. Assume you plan to save $4,000 per year with the first investment made one year from now. You think you can earn 7.0% per year on your investments and you plan to retire in 29 years, immediately after making your last $4,000 investment. a. How much will you have in your retirement account on the day you retire? b. If, instead of investing $4,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be? c. If you hope to live for 28 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the 28th withdrawal (assume your savings will continue to earn 7.0% in retirement)? d. If, instead, you decide to withdraw $70,000 per year in retirement (again with the first withdrawal one…arrow_forwardQ1:If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years Q2:What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually Q3:Your parents will retire in 18 years. They currently have $250,000, and they think they will need $1 million at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Q4:If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money?arrow_forward
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