A diamond ring will be worth P35,000 in 2023. How much was it when it was bought in 2019 if the annual inflation and interest rates for the period are 7% and 9%, respectively?
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- A couple decided that for every child that will be born they will place a deposit in the bank so that the child's 18th birthday he will received an amount of P 300,000. If they deposit today an amount of P 15,249.13, what is the bank's nominal rate annually?What is the amount due on July 8, 2022, if the present value on July 31, 2021 was P24192 at 7.4% simple interest? Round your answer to 2 decimal places. Add your answerMaria, who is now 51 years old, is employed by a firm that guarantees her a pension of $35,000/year at age 65. What is the present value of her first year's pension if the inflation over the next 14 years is 3%/year compounded continuously? 4%/year compounded continuously? 6%/year compounded continuously? (Round your answers to the nearest cent.)
- Omar's current annual salary is $54,000. How much will he need to earn (in dollars) 10 years from now to retain his present purchasing power if the rate of inflation over that period is 2%/year? Assume that inflation is continuously compounded. (Round your answer to two decimal places).Provide only the cash flow diagrams of these 3 items. 1. You are the manager of a large crude oil refinery. As part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. The replacement and downtime cost in the first year is $175,000. This cost is expected to increase due to inflation at a rate of 8% per year for five years, at which time this particular heat exchanger will no longer be needed. If the company’s cost of capital is 18% per year, how much could you afford to spend for a higher quality heat exchanger so that these annual replacement and downtime costs could be eliminated? 2. An electronic device is available that will reduce this year’s labor costs by $10,000. The equipment is expected to last for 8 years. Labor costs increase at a rate of 7% per year and the interest rate is 12% per year. a. What is the maximum amount that we could justify spending for the device? b.…Suppose an amount of P300,045 is invested in 19 years at 7.37% per year. How much is the earning of the investment after 19 years? Write your answer in two decimal places.
- The bank is paying 11.26% compounded annually. The inflation is expected to be 17.56% per year. What is the inflation rate?If P1,000 becomes P6,343 after 13 years when invested, what is the nominal interest rate?SHOW SOLUTIONS A couple decided that for every child that will be born they will place a deposit in the bank so that the child's 18th birthday he will received an amount of P 300,000. If they deposit today an amount of P 15,249.13, what is the bank's nominal rate annually?
- The bank is paying 11.42% compounded annually. The inflation is expected to be 5.67% per year. What is the market interest rate?To make CDs look more attractive as an investment than they really are, some banks advertise that their rates are higher than their competitors' rates; however, the fine print says that the rate is based on simple interest. If you were to deposit $16,000 at 10.00% per year simple interest in a CD, what compound interest rate would yield the same amount of money in 3 years? (Round the final answer to three decimal places.) The compound interest rate that would yield the same amount of money in 3 years is % per year.Joe just completed his engineering degree and started to work for an engineering firm. Joe wants to retire early after 30 years working. He plans to invest $5,000 at the end of every year for a 30-year career. If Joe needs $3,954,750 (about $1,400,000 in today's dollars accounting for an expected 3.5% inflation rate) in savings at retirement, what interest rate must the investment earn?