Question

How much would you have to invest today to receive the following? Use Appendix B or Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

  
a. $15,250 in 11 years at 7 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

b. $19,600 in 18 years at 11 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

c. $8,000 each year for 14 years at 8 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

d. $55,000 each year for 20 years at 14 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

Phil Goode will receive $111,000 in 18 years. His friends are very jealous of him.

If the funds are discounted back at a rate of 15 percent, what is the present value of his future “pot of gold”? Use Appendix B for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Sherwin Williams will receive $18,250 a year for the next 15 years as a result of a picture he has painted. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. What is the present value of these payments if the discount rate is 7 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

You invest a single amount of $16,000 for 7 years at 11 percent. At the end of 7 years you take the proceeds and invest them for 16 years at 19 percent.

   
How much will you have after 23 years? Use Appendix A for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Franklin Templeton has just invested $9,860 for his son (age one). This money will be used for his son’s education 20 years from now. He calculates that he will need $31,603 by the time the boy goes to school.

What rate of return will Mr. Templeton need in order to achieve this goal? Use Appendix B for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Les Moore retired as president of Goodman Snack Foods Company but is currently on a consulting contract for $58,000 per year for the next 11 years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. If Mr. Moore’s opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

b. Assuming Mr. Moore will not retire for two more years and will not start to receive his 11 payments until the end of the third year, what would be the value of his deferred annuity? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

  

  

  

Answer 1

a.

How much would you have to invest today to receive

=15250/(1+7%)^11

=7245.17

b.

How much would you have to invest today to receive

=19600/(1+11%)^18

=2995.31

c.

How much would you have to invest today to receive

=8000/(1+8%)^14

=2723.69

d.

How much would you have to invest today to receive

=55000/(1+14%)^20

=4001.89