Question

please can you answer question 19-25

19) A bank offers a home buyer a 30-year loan at 3.5% per year. If the home buyer borrows $320,000 from the bank, how much must be repaid every year? A) $6.199 B) $10,667 C) $17,399 D) ST14,009 20) Your firm just signed a contract to receive royalty forever. The royalty is estimated to be Simil, every year, starting from next year. If the discount rate is 11%, what is the present value of the royalties from this contract? A) S11mil B) $110mil C) $9.1 mil D) S0.9mil 21) Which of the following is FALSE? i) A dollar today and a dollar in one year may be considered to be equivalent. ii) To calculate a cash flow's present value (PV), you must compound it. iii) If you want to compare or combine cash flows that occur at different points in time, you first need to convert the cash flows into the same units or move them to the same point in time. iv) The difference between an annuity and a perpetuity is that a perpetuity ends after some fixed number of payments. A) i and ii B) i and iv C) i, ii, and iv D) all of the above

Answer 1

19 Equal installment be x pv of annuity factor for 3.5% in 30 years = 18.39 Amount of repayments) X= 320,000 18.39 = 17,400 Hence loption cl present value of perpetuity annuity facta a = 1 million = $901 million boll 2 Hence option c option -C ů a dollar today is more valuable than dollar in one year i To calculate pv, you should discount in in Annuity ends at Ared time where as perpetuity lasts forever 12 lof So

2 en effective annual rate ») (1 +%) Hence = 1:083-1 = 0.083 option - A : 8.3%) 23 present value =A Joj is intust go inflation - 200,000 sə where A = initial payment DV: 10,000 - 10,000 0.07-0.02 0.05 Hence option DJ @4 option - B - Buy on NASDAQ & Sell on NYSE make $35 @5 pv of cash flow = 400g + doga* 20.0833 = 92:59+171047 + 238.09 = 502.15 Hence option A 13 10