FUND OF CORP FIN >CUSTOM<
11th Edition
ISBN: 9781308616384
Author: Ross
Publisher: MCG/CREATE
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Chapter 6, Problem 38QP
Growing
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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?
Chapter 10 Discussion Q2
A perpetuity will pay $900 per year, starting five years after the perpetuity is purchased. What is the present value (PV) at time 0, given that the interest rate is 11%? Show your steps.
A) $2695
B) $4312
C) $5390
D) $3234
5. 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…
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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- 13–19. If you saved an average of $2,900 each year from your income tax return, $1,050 for not buying vendor coffee, and $2,400 (saving $200 each paycheck), how much would you have in your retirement account if you were able to invest these annual savings at the end of each year for 30 years at 5% interest compounded annually? What amount should Al invest today so that he will be able to withdraw $28,000 at the end of each year for 15 years after he retires? Assume he can invest the money at 8% interest compounded annually.arrow_forward13–19. If you saved an average of $2,900 each year from your income tax return, $1,050 for not buying vendor coffee, and $2,400 (saving $200 each paycheck), how much would you have in your retirement account if you were able to invest these annual savings at the end of each year for 30 years at 5% interest compounded annually? PROVIDE THE FOLLOWING FOR EACH PROBLEM N= I= PV= PMT= FV= C/Y= P/Y =arrow_forwardQ5 Consider that you are 35 years old and have just changed to a new job. You have $86,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $4,200 each year into your new employer’s plan.If the rolled-over money and the new contributions both earn a 7 percent return, how much should you expect to have when you retire in 30 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) FUTURE VALUE?arrow_forward
- Q.2 A saving system yields $8,000 at the end of the first 5 years, and a further $1,000 increase every year for a total of 20 years. Find the equivalent amount at the end of each year for the whole 20-year period, if the interest rate is 10%.arrow_forwardQ14 Ishan and Hazel plan to retire at age 60 with a retirement income of $48,000 a year from their savings. Rather than pay themselves the whole amount at the beginning of each year, they have decided that payment at the beginning of each quarter of $12,000 gives them the right balance of flexibility and maximized interest earnings. They feel they can safely earn an interest rate of 8%, compounded quarterly, on their money and they are budgeting based on the prediction that they will live until they are 90 years old. How much money will they have to have saved by the time they are 60 in order to fulfill this plan? If the same total calculated above was to be saved, but no interest earned whatsoever, how much would be available to live on each quarter? If the full 30 years are lived and quarterly budget spent, how much money in total will have been utilized in retirement? How much will have been earned in interest?arrow_forwardQuestion 9 Suppose you need to accumulate GHȼ100,000 in 10 years. You plan to make a deposit in a bank now, at Time 0, and then make 9 more deposits at the beginning of each of the following 9 years, for a total of 10 deposits. The bank pays 6% interest, you expect inflation to be 2% per year, and you plan to increase your annual deposits at the inflation rate. How much must you deposit initially?arrow_forward
- 1On the day you retire you have $500,000 saved. You expect to live another 30 years during which time you expect to earn 8% on your savings while inflation averages 3.5% annually. Assume you want to spend the same amount each year in real terms and die on the day you spend your last dime. What real amount will you be able to spend each year? a. $61,931.78 b. $79,211.09 c. $79,644.58 d. $30,695.77 2Now consider your financial objective is to save $500,000 for preparing your retirement, assuming 30 years from now. If you invest your RRSP savings in a mutual fund which can realize an average return of 10% per year. To achieve your goal, how much do you need to save at the end of each year over the 30-year period? a. 4,039.26 b. 3,039.62 c. 2,985.54 d. 10,988.32 3What is the FV of $100 deposited today into an account with an APR 12.6%, compounded semiannually for 10 years? a. 1478.96 b. 3460.06 c. 327.63 d. 339.36arrow_forwardPA3. LO 11.3Use the tables in Appendix B to answer the following questions. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?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