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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Present Values

Required:

Note: Round answers to two decimal places. Determine the:

a. present value of a single $14,000 cash flow in 7 years if the interest (discount) rate is 8% per year.

b. number of periods for which $5,820 must be invested at an annual interest (discount) rate of 7% to produce an investment balance of $10,000.

c. size of the annual cash flow for a 25-year annuity with a present value of $49,113 and an annual interest rate of 9%. One payment is made at the end of each year.

d. annual interest rate at which an investment of $2,542 will provide for a single $4,000 cash flow in 4 years.

e. annual interest rate earned by an annuity that costs $17,119 and provides 15 payments of $2,000 each, one at the end of each of the next 15 years.

To determine

(a)

Introduction:

Compound interest considers the time value of money. Present value of Cashflow means the amount that should be invested to earn a specific amount on a specific date.

To calculate:

Present Value.

Explanation

Cash Flow (f) = $14,000

No. of periods = 7

Interest Rate = 8% p.a.

PV = Present Value

PV = (f)(PV of a single ...

To determine

(b)

Introduction:

Compound interest considers the time value of money. Present value of Cashflow means the amount that should be invested to earn a specific amount on a specific date.

To calculate:

No. of periods.

To determine

(c)

Introduction:

Compound interest considers the time value of money. Present value of Cashflow means the amount that should be invested to earn a specific amount on a specific date.

To calculate:

Annual Cashflow.

To determine

(d)

Introduction:

Compound interest considers the time value of money. Present value of Cashflow means the amount that should be invested to earn a specific amount on a specific date.

To calculate:

Interest rate.

To determine

(e)

Introduction:

Compound interest considers the time value of money. Present value of Cashflow means the amount that should be invested to earn a specific amount on a specific date.

To calculate:

Interest rate.

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