Answered: urance investment plan promises…

urance investment plan promises Ms.valentine a lump sum cost of sh.5500000 after the end of 15 years from now if the cost of capital is 18% how much is valen

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 6PROB

See similar textbooks

Related questions

Q: An oil well which could produce a net income of P15,083,207 per year for 25 years is being purchased…

A: Return on Investment: The net profit or return earned on the initial investment is known as the…

Q: Question 1…

A: Effective annual rate The genuine interest rate on an investment or loan is the effective yearly…

Q: Question content area top Part 1 (Yield to maturity) A bond's market price is $1,200. It has a…

A: Solution:- Bond price means the price at which a bond is presently trading in the market. We know,…

Q: Edison Power and Light has an outstanding issue of cumulative preferred stock with an annual fixed…

A: Solution: Common shareholders are the owners of a firm and carry voting rights, but do not have any…

Q: Exercises: a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The…

A: Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the first…

Q: Jack borrowed $4239 at 7.8% to buy a used car. He paid the maturity value of $5460. Find the time of…

A: The question is related calculation of Duration or time. Simple Interest = Principal × Rate × Time

Q: You bought a car 4 years ago, taking out a $22,000 loan at a 5.4% interest rate for 5 years. Your…

A: When we make a mortgage payment we pay fixed monthly amounts as payments towards the mortgage.…

Q: If a person inherited $100,000 and decided to buy stock in a new venture through a private…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 2.Evan has the following income and expenses. Use 4 weeks = 1 month even though this is generally…

A: Solution:- Income means the amount earned and expense means the amount expended. The difference…

Q: What does a firm need to do to improve liquidity? O A. Stock up on inventory in order to never run…

A: Liquidity situation of the business means ability of the business to pay short term obligations from…

Q: (Common stock valuation) Assume the following: • the investor's required rate of return is…

A: As per Gorden's Model Growth is calculated with the help of following formula Growth = Retention…

Q: Find the tax owed on a purchase of $183.11 if the state sales tax rate is 6%.

A: Taxes are the dues and obligations, which needs to be paid or settled by the business to the…

Q: Explain the chat of Grenada gdp Grenada gdp per capita for 2020 was $9,680, a 10.5% decline from…

A: GDP per capita is calculated by dividing the Gross Domestic Product (GDP) of a country by mid year…

Q: A vegetable stand owner purchases onions at the rate of P350 per kg daily and sells it at the rate…

A: Profit or loss can be calculated as follows = Selling price - Cost of product If the above figure is…

Q: The company issued 4-year bond on January 1, 2018. The coupon rate is 8% payable semiannually. The…

A: Face Value $ 1,000.00 Time Period 4 Coupon rate 8% Yield to Maturity 10% Purchased…

Q: 2. Computer for the Net Present Value using the present value of an annuity. Ge Present value of…

A: The net present value has been used as a measure of the profitability of an investment. It discounts…

Q: Intro You've assembled the following portfolio: Stock Expected return Portfolio weight 1 9.3% 30% 2…

A: Expected rate of return is calculated by multiplying the assets weight with expected return.…

Q: Suppose that last year, the 12-month interest rates for the Australia and the Greece are 2.4% and…

A: The forward exchange rate is used to find out the exchange rate between two currencies in the future…

Q: PLEASE DO THIS COMPLETELY AND TYPEWRITTEN. I WILL UPVOTE. ELABORATE ON THE ANSWERS. SKIP THIS IF YOU…

A: The Net Present Value is calculated with the help of following formula Net Present Value = Present…

Q: Este United States: $4.93 Euro Area: €3.72 Pus PEU where Ese is the US dollar/Euro exchange rate,…

A: According to PPP concepts the prices all over the world must be equal and exchange rate must adjust…

Q: The National Company has decided to undertake a large project. Consequently, there is a need for…

A: Here, Perpetual Preferred Dividend is P5 Par Value is 30 Required Return is 25%

Q: explain three CAPM assumptions and their appropriateness for family firms?

A: The (CAPM) describes the link between systematic risk and expected return on assets, namely stocks.…

Q: 4. What is the result of repaying debt? (Ignoring changes in the cost of capital) A B C D A decrease…

A: 1)Debt is a liability.Repayment of debt involves reduction of liability and reduction of cash. 2)…

Q: % and the projects have the following investments and cash flow. Project A 100,000.00 40,000.00…

A: Net present value is the difference between the present value of cash flow and initial investment in…

Q: Information below is related to Jea Maggie Ison’s Company Return on Sale 15% Asset…

A: The question is related to the Ratio Analysis. The return on Equity ia calculation as per Du point…

Q: You decide to finance a $21,000.00 car at a 4% interest rate for 4 years. A. How much will your…

A: Car cost ,P =$21,000 Interest Rate, r= 4%=0.04/12= 0.003333333333 Years,n = 4 or 48 months Formula…

Q: Why financial analysis is made for evaluation of a system? How is it useful in design?

A: Financial analysis is a process where monetary based transactions such as capital projects,…

Q: An investor buys a five-year, 7.5% annual coupon bond priced to yield 5%. The investor plans to sell…

A: As per the given information: Coupon rate - 7.5% Yield - 5% Time to maturity - 5 years Bond sold in…

Q: Suppose that an investor buy a call option on IBM stock with strike price X = 60 USD, which has 6…

A: A call option is a type of contract where the buyer of the call option has the choice of buying the…

Q: Finance From the information below, select the capital structure that results in the lowest WACC for…

A: Company requires funding for their investment which can be obtained from broadly two sources.…

Q: Anderson International Limited is evaluating a project in Erewhon. The project will create the…

A: NPV can be calculated by following function in excel =NPV(rate,value1,[value2],…) + Initial…

Q: WHAT DOES BREAK-EVEN ANALYSIS EXPLAIN?

A: Break Even - Break even is the level of sales wherein the total cost = Total revenue, in simple…

Q: Is this statement true or false? Please explain in detail As debt-financing is usually cheaper than…

A: Debt financing is a cheaper source of finance than equity financing because tax saving on interest.…

Q: An investor buys a five-year, 7.5% annual coupon bond priced to yield 5%. The investor plans to sell…

A: Par Value of Bond is $1000 Coupon rate is 7.5% Yield is 5% Time to maturity is 5 years Bond is sold…

Q: The table given below summarizes the 2019 income statement and end-year balance sheet of Drake’s…

A: The question is related to Ratio Analysis. The details are given regarding the same.

Q: An integrated, combined cycle power plant produces 295 MW of electricity by gasifying coal. capital…

A: Payback period is the time taken by the project to cover its initial investment. It is the time to…

Q: Measuring growth) Given that a firm's return on equity is 21 percent and management plans to…

A: Growth rate = Return on equity * Retention ratio

Q: BALANCE SHEET Cash $ 140.0 Accounts payable $ 800 .0 Accts. receivable 880 .0 Notes payable 600.0…

A: The question is related to Ratio Analysis. 1. Debt Ratio is calculated by dividing total debts by…

Q: It is a tax on the value of an article increased at each stage of its production or distribution.…

A: Excise tax is a type of indirect tax employed in case of specific goods (eg. fuel, tobacco,…

Q: Question content area top Part 1 (Related to Checkpoint 9.3) (Bond valuation) Doisneau 21-year…

A: Solution: Bond price means the current market price of bond. Bond price = Present value of coupon…

Q: What is the value of a preferred stock where the dividend rate is 15 percent on a $100 par value,…

A: Value of preferred stock = Preferred dividend / Required rate of return or yield

Q: Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in…

A: Covariance: Covariance measures the extent to which two variables vary in relation to each other.…

Q: How much are you willing to pay for a bond with $1,000 face value and an 7% coupon rate with 2 years…

A: The price of a bond today is the sum total of all future payments receivable in the form of coupon…

Q: Calculate the value of a bond that matures in 19 years and has a $1,000 par value. The annual coupon…

A: Present Value can be calculated using PV function in excel PV (rate, nper, pmt, [Fv], [type])…

Q: ordinary annuity that earns 7.3% compounded monthly has a current balance of $600,000. The owner of…

A: We will apply the required formula for all 3 monthly payments and will calculate the number of…

Q: Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lockbox…

A: Lockbox system is a service provided by banks to different companies with regards to receipt of…

Q: Use trial and error to find the IRR within a 2% range. (Hint: Use Gammaro's hurdle rate of 8% to…

A: Internal Rate of Return for an investment proposal is the dicount rate that equates the Present…

Q: Which of the following statements is most correct? Why?* a. If a market is weak-form efficient, this…

A: Efficient market hypothesis is one of the basic theorem used to understand the market movement s and…

Q: Finance Funds deposited into an Individual Retirement Account by an investor can be withdrawn…

A: IRA is individual retirement account where one can deposit after tax amount of income into account…

Q: Finance THE MAXIMUM LOSS FOR A CALL OPTION BUYER IS: A. THE STRIKE PRICE LESS THE OPTION PREMIUM B.…

A: An Option is an privilege that gives the buyer of the option the right, but not the obligation, to…

Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

An insurance investment plan promises Ms.valentine a lump sum cost of sh.5500000 after the end of 15 years from now if the cost of capital is 18% how much is valentine willing to accept right now in lieu of the lumpsim?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Conestoga Plumbing plans to invest in a new pump that is anticipated to provide annual savings for 10 years of $50,000. The pump can be sold at the end of the period for $100,000. What is the present value of the investment in the pump at a 9% interest rate given that savings are realized at year end?
Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
Your friend has a trust fund that will pay her the following amounts at the given interest rate for the given number of years. Calculate the current (present) value of your friends trust fund payments. For further instructions on future value in Excel, see Appendix C.
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
An investor has a cost of capital of 10%. She is due to receive a 5 year annuity starting in 3 year's time of $7,000 per annum. What lump sum amount would you need to offer today to make her indifferent between the annuity and your offer?
Solve by using the sinking fund or amortization formula. Betty Price purchased a new home for $245,000 with a 10% down payment and the remainder amortized over a 15 year period at 9% interest. (a) What amount (in $) did Betty finance? $ (b) What equal monthly payments (in $) are required to amortize this loan over 15 years? (Round your answer to the nearest cent.) $ (c) What equal monthly payments (in $) are required if Betty decides to take a 20 year loan rather than a 15 year loan? (Round your answer to the nearest cent.) $