Question

A contractual arrangement requires payments of $15,000 on 7 October 2019 and $9,000 on 7 October 2024. What is an equivalent single amount payable on 7 October 2026 at an interest rate of 4% p.a. compounding quarterly? O a. $29,881.28 b. $25,988.56 OC. $29,565.07 d. $28,819.36

Hi!

Can you please help me with these questions as my teacher did not provide the answers.

Thanks!

Answer 1

Answer:-

Principal amount = $ 15000
Interest rate = 4 % compounded quarterly for 7 years from 2019 to 2026
Amount = Principal x ( 1+r)ⁿ
Here r = (0.04/4) as it is compounded quarterly and n= 28 as n = 7 x 4 as it is for 7 years compounded quarterly ie. 4 times.
Amount = $ 15000 x [1 + (0.04 / 4) ]²⁸
= $ 15000 x (1.01)²⁸
= $ 15000 x 1.3213 = $ 19819.5

Principal amount = $ 9000
Interest rate = 4 % compounded quarterly for 2 years from 2024 to 2026
Amount = $ 9000 x [1 + (0.04 / 4) ]⁸
= $ 9000 x (1.01)⁸
= $ 9000 x 1.083 = $ 9747

Total amount = $ 19819.5 + $ 9747 = $29566.5

Therefore the correct Option is c. which is $ 29565.07 which is the closest to the obtained value of $ 29566.5

Answer:-

The correct option is c. The shareholder's equity is the market value of firm's equity. It can be calculated by multiplying share price and number of shares outstanding.

The other options are incorrect.

The option d is incorrect as total assets minus total liabilities is equity.
The option e is incorrect as the residual value of firm after all debts have been paid includes equity and retained earnings but not completely equity.

Answer:-

Principal amount = $ 800
Interest in two weeks = $ 10

Annual Interest rate = ($ 10 / $ 800) x 26 [ The number is multiplied by 26 as there are 52 weeks and the interest is $ 10 for 2 weeks therefore it will be $ 10 x 26 for one year ]

Annual interest rate  = 0.0125 x 26
= 0.325 = 32.5 %

Therefore Option c is correct.