INTERMEDIATE ACCOUNTING (LL) W/CONNECT
9th Edition
ISBN: 9781260679694
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 6.14E
To determine
Present value:
Present value refers to the present worth of the money that is received in future in a lump sum or as series of cash flows at a specified interest rate. When these future sums of money are discounted at a higher rate, the present value of the future cash flows gets lower.
Future Value: The future value is value of present amount compounded at an interest rate until a particular future date. The future value of an amount is calculated by using the following formula:
To determine: The Interest rate implicit in this agreement.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
• LO 12.1 Campus Flights takes out a bank loan in the amount of $200,000 on March 1. The terms of the loan include a repayment of principal in ten equal
installments, paid annually from March 1. The annual interest rate on the loan is 8%, recognized on December 31. (Round answers to the nearest whole
dollar if needed.)
1. The interest expense recognized as of December 31 in year 1 rounded to the whole dollar is $ type your answer...
2. The principal due in year 1 is $ type your answer....
Question Help ▼
Scott invested a total of $5900 at two separate banks. One bank pays simple interest of 10% per year while the other pays simple interest at a rate of 8% per year.
Scott earned $534.00 in interest during a single year, how much did he have on deposit in each bank?
Scott had $
on deposit at the bank that payed 10% interest.
ur
Question Number 2: [CLO5, PLO3]
A $10,000 certificate of deposit earns simple interest of 8 percent per year. Calculate the total
earned money over the 5 year period?
A. A sum of $22,000 is invested in a savings account which pays interest at the rate of 7 percent
per year compounded quarterly. If the amount is kept on deposit for 10 years, what will the
compound amount equal? How much interest will be earned during the 10 Years.
B. A Company wants to deposit $1,000,000 per year in an investment which earns interest of 10
percent per year. Assume the first deposit is made at the end of the current year and addidtional
deposits at the end of each following year.
a) To what sum will the investment grow at the time of the 10th deposit?
b) How much interest will be earned.
C. A person wants to generate four intallments of $1,000 in the following four years. How much
money should be invested, if the interest rate is 10 percent per year.
Chapter 6 Solutions
INTERMEDIATE ACCOUNTING (LL) W/CONNECT
Ch. 6 - Prob. 6.1QCh. 6 - Explain compound interest.Ch. 6 - Prob. 6.3QCh. 6 - Prob. 6.4QCh. 6 - Prob. 6.5QCh. 6 - Prob. 6.6QCh. 6 - What is an annuity?Ch. 6 - Explain the difference between an ordinary annuity...Ch. 6 - Prob. 6.9QCh. 6 - Prepare a time diagram for the present value of a...
Ch. 6 - Prepare a time diagram for the present value of a...Ch. 6 - What is a deferred annuity?Ch. 6 - Assume that you borrowed 500 from a friend and...Ch. 6 - Compute the required annual payment in Question...Ch. 6 - Explain how the time value of money concept is...Ch. 6 - Prob. 6.1BECh. 6 - Prob. 6.2BECh. 6 - Prob. 6.3BECh. 6 - Present value; single amount LO63 John has an...Ch. 6 - Present value; solving for unknown; single amount ...Ch. 6 - Future value; ordinary annuity LO66 Leslie...Ch. 6 - Future value; annuity due LO66 Refer to the...Ch. 6 - Prob. 6.8BECh. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - Solve for unknown; annuity LO68 Kingsley Toyota...Ch. 6 - Price of a bond LO69 On December 31, 2018,...Ch. 6 - Lease payment LO69 On September 30, 2018,...Ch. 6 - Prob. 6.1ECh. 6 - Future value; single amounts LO62 Determine the...Ch. 6 - Prob. 6.3ECh. 6 - Prob. 6.4ECh. 6 - Prob. 6.5ECh. 6 - Solving for unknowns; single amounts LO64 For...Ch. 6 - Future value; annuities LO66 Wiseman Video plans...Ch. 6 - Prob. 6.8ECh. 6 - Solving for unknowns; annuities LO68 For each of...Ch. 6 - Prob. 6.10ECh. 6 - Prob. 6.11ECh. 6 - Deferred annuities LO67 Required: Calculate the...Ch. 6 - Prob. 6.13ECh. 6 - Prob. 6.14ECh. 6 - Solving for unknown annuity amount LO68 Required:...Ch. 6 - Prob. 6.16ECh. 6 - Price of a bond LO69 On September 30, 2018, the...Ch. 6 - Price of a bond; interest expense LO69 On June...Ch. 6 - Lease payments LO69 On June 30, 2018,...Ch. 6 - Lease payments; solve for unknown interest rate ...Ch. 6 - Prob. 6.21ECh. 6 - Analysis of alternatives LO63, LO67 Esquire...Ch. 6 - Prob. 6.2PCh. 6 - Analysis of alternatives LO63, LO67 Harding...Ch. 6 - Investment analysis LO63, LO67 John Wiggins is...Ch. 6 - Prob. 6.5PCh. 6 - Prob. 6.6PCh. 6 - Prob. 6.7PCh. 6 - Deferred annuities LO67 On January 1, 2018, the...Ch. 6 - Prob. 6.9PCh. 6 - Noninterest-bearing note; annuity and lump-sum...Ch. 6 - Solving for unknown lease payment LO68, LO69...Ch. 6 - Solving for unknown lease payment; compounding...Ch. 6 - Lease v s. buy alternatives LO63, LO67, LO69...Ch. 6 - Prob. 6.14PCh. 6 - Prob. 6.15PCh. 6 - Prob. 6.1BYPCh. 6 - Prob. 6.2BYPCh. 6 - Prob. 6.3BYPCh. 6 - Prob. 6.4BYPCh. 6 - Judgment Case 65 Replacement decision LO63, LO67...Ch. 6 - Prob. 6.6BYPCh. 6 - Prob. 6.7BYP
Knowledge Booster
Similar questions
- Question 12 To purchase a new car, you borrow $20,000. The bank offers a 6-year loan at an interest rate of 3.25% compounded annually. If you make only one payment at the end of the loan period, repaying the principal and interest: How much of the total amount repaid represents interest? $4.231 O $4,321 O 4,.123 O $4.331arrow_forwardProblem 5-22 Perpetuities (LO3) A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever." a. Calculate the present value of your payments to the bank if the interest rate is 8.25%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is 8.25%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forwardes Problem 5-22 Perpetuities (LO3) A local bank advertises the following deal: "Pay us $100 at the end of each year for 12 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever." a. Calculate the present value of your payments to the bank if the interest rate is 6.50%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value b. What is the present value of a $100 perpetuity deferred for 12 years if the interest rate is 6.50%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value c. Is this a good deal? No Yesarrow_forward
- Problem 25-7 (LG 25-4) Assume an Fl originates a pool of short-term real estate loans worth $39 million with maturities of five years and paying interest rates of 7 percent (paid annually). The loans are amortized. a. What is the average payment received by the FI (both principal and interest) if no prepayment is expected over the life of the loans? b. If the loans are converted into real estate certificates and the Fl charges a 150 basis points servicing fee (including insurance), what are the payments expected by the holders of the securities, if no prepayment is expected? (For all requirements, enter your answers in dollars not in millions. Do not round intermediate calculations. Round your answers to the nearest dollar amount.) × Answer is complete but not entirely correct. Average payment $ 9,511,737 b. Average payment $ 9,369,061 (X)arrow_forwardExercise 5-24 (Static) Solving for unknown interest rate; installment notes [LO5-9, LO5-10] Big Warehouses borrowed $100,000 from a bank and signed a note requiring 20 annual payments of $13,388 beginning one year from the date of the agreement. Required: Determine the interest rate implicit in this agreement. Note: Use tables, Excel, or a financial calculator. Round percentage answer to one decimal place. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Solve for i Present value Annuity payment n= (=arrow_forwardQUESTION 6 You have a 7-year loan of $80,000. The borrower will pay $8,500 at the end of Year 1, $9,500 at the end of Year 2, and $7,500 at the end of Year 3, plus X at the end of each year from Year 4 through Year 7. X is the fixed but unspecified cash flow. The loan's rate is 9%. What is X? O $22,3617.01 O $21,954.25 $23,350.31 O $19,411.02arrow_forward
- Problem 5-55 Effective Interest Rate (LO4) You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $12, which is taken out of the initial proceeds of the loan. What is the effective annual interest rate on the loan, taking account of the impact of the initiation fee? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.) Effective annual interest ratearrow_forward#3 You want to buy a $200000 home. You plan to pay $20000 as a down payment, and take out a 20 year loan at 5.25% interest for the rest.a) What is the amount of the payment? answer: $1212.92 b) If the bank charges 1.5 points on the loan, what is the amount charged for points? answer: $2700 PLEASE ONLY ANSWER C, I got the other two questions answered from you guys already. c) If the bank charges 1.5 points on the loan, what is the true interest rate?arrow_forwardProblem 16. Tina borrowed two student loans and owes $25,000 in total on these loans. Last year she paid the total amount of interest of $2,185. Given, that the interest rate on the federal loan is 16% and the interest rate on the bank loan is 5%. What is the principal for each loan? 1. $16,500 and 88,800 2. $16,000 and $9,000 3. $15,000 and $10,000 $8,500 and $16,500 4. 5. $11,000 and $14,000arrow_forward
- Exercise 5-20 (Algo) Deferred annuities; solving for annuity amount [LO5-8, 5-9] On April 1, 2024, Antonio purchased appliances from the Acme Appliance Company for $500. In order to increase sales, Acme allows customers to pay in installments and will defer any payments for six months. Antonio will make 18 equal monthly payments, beginning October 1, 2024. The annual interest rate implicit in this agreement is 24%. Required: Calculate the monthly payment necessary for Antonio to pay for his purchases. Note: Use tables, Excel, or a financial calculator. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Monthly paymentarrow_forwardProblem 6-7 (Algo) Short-term versus longer-term borrowing [LO6-3] Boatler Used Cadillac Company requires $810,000 in financing over the next two years. The firm can borrow 7 percent interest per year. Ms. Boatler decides to do forecasting and predicts that if she utilizes short-term fir pay 5.25 percent interest in the first year and 9.55 percent interest in the second year. Assume interest is pai year. a. Determine the total two-year interest cost under each plan. Long-term fixed-rate Short-term variable-rate b. Which plan is less costly? Interest Cost Short-term variable-rate plan Long-term fixed-rate planarrow_forwardT TWO Financial ToolsAHD oldagni Personal Finance Problem datoesulov prost limp5-9 Single-payment loan repayment Kelly borrows $30,000, to start a motor repair business in Hong Kong, that she must repay in a lump sum within the next 9 years. The interest rate is 10% annually compounded. There is no prepayment penalty. a. What amount will be due if she decides to repay the loan after 2 years? b. How much would she have to repay after 5 years? boinoq sizoga OS c. What amount is due at the end of 8 years? P5-10 Present value calculation Without referring to the preprogrammed function on your financial calculator, use the basic formula for present value, along with the given discount rate, r, and the number of periods, n, to calculate the present value of $1 in each of the cases shown in the following table. 2 Isno2199 meldo19 sonsni Discount rate, r Case 2 16 1006 agnivse s ni 19 Number of periods, n 4 A 2% lisunns babnuod 10 i 2 C 5 3 Gay S(B) Ted Bal 2 indicatos problems gnibnit uoy seU…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning