Homework Answers
Question 22)
In case of annuity due, payments are made sooner as compared to ordinary annuity and hence have higher present value as compared to ordinary annuity. All other things are identical. Only in case of interest rate going down, will ordinary annuity payment be more than annuity due.
Answer is False
Option B
Question 20)
Probability of loss is 70% and payment of 10,000 is to be made three years from now. After three years 10,000 is to be paid but probability is 70% and amount will be 70% of 10,000 = 7,000
Risk free rate is 5% and market premium to be added is 4% hence total rate is 5 + 4 = 9%
This is to be calculated for three years.
Hence correct answer is
PV = $ 7000 * PVF ( 3,9%)
Option C
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Question 22 (5 points) All else being equal that is, identical present value, identical number of...
need answer to 21 (continued from the previous question) Which of the following is (approximately) the...
need answer to 21
(continued from the previous question) Which of the following is (approximately) the present value? (note: if your answer is within $50 from one of the answer choices, it's a rounding issue: select that answer. For example, if you got something like $8,140, select the answer "$8,103") $5,405 $8,103 $9,065 $6,047 $19,063 $20,016 -5 None of the above, because all the answers are more than $50 away from the correct present value ! You have been sued....
Problem 3 A) Pierluigi is trying to get a loan for $10,000 to start a business...
Problem 3 A) Pierluigi is trying to get a loan for $10,000 to start a business as a financial advisor and is trying to decide between several options. (15 points) i) A $10,000 loan that needs to be paid back after 5 years with a 5% nominal annual interest rate, compounded monthly interest ) A $10,000 loan that needs to be paid back after 6 years, the first 2 years there is no and after the annual effective interest rate...
How much is the equivalent present value in year 0 for a 5-year annuity, starting at...
How much is the equivalent present value in year 0 for a 5-year annuity, starting at the end of year 1 with $10,000 at end of each year, at an annual interest rate at 8% per year, compounded quarterly? An amortized loan is the arrangement that you pay same amount at the end of each period and you pay off the loan after the last payment. If the beginning amount of a 5-year loan is $10,000, the nominal annual interest...
Problem 3 B) Pierluigi is trying to get a loan for $10,000 to start a business...
Problem 3 B) Pierluigi is trying to get a loan for $10,000 to start a business as a financial advisor and is trying to decide between several options. (15 points) DA $10,000 loan that needs to be paid back in 6 years with a 6 % nominal annual interest rate, compounded monthly i) A $10,000 loan that needs to be paid back in 7 years, which accrues no interest during the first 2 years but has a 10% effective interest...
The present value of an annuity is the sum of the discounted value of all future...
The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. bevinning of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year An annuity that pays...
7. Present value of annuities and annuity payments The present value of an annuity is the...
7. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the end of each year...
I need help on question 2. MODULE IV: TIME VALUE OF MONEY INTRODUCTION The time value...
I need help on question 2.
MODULE IV: TIME VALUE OF MONEY INTRODUCTION The time value of money analysis has many a lysis has many applications, ranging from setting hedules for paying off loans to decisions about whether to invest in a partie financial instrument. First, let's define the following notations: I = the interest rate per period Na the total number of payment periods in an annuity PMT = the annuity payment made each period PV = present value...
part 1 given info present value = periodic interest rate = number of compounding periods =...
part 1 given info present value = periodic interest rate = number of compounding periods = 190.00 0.080 6.00 What is the future value (single payment)? part 2 future value periodic interest rate = number of compounding periods = 301.51 0.080 6.00 what is the present value (single payment)? part 3 periodic payment periodic interest rate = number of compounding periods = 340.00 0.02 8.00 What is the future value of this annuity? part 4 present value (amount borrowed) =...
Time Value of Money Spreadsheet Example 4 Module IV Name: Date: 6 7 8 Question 1 9 Question 2 10 Question 3 11 Question...
Time Value of Money Spreadsheet Example 4 Module IV Name: Date: 6 7 8 Question 1 9 Question 2 10 Question 3 11 Question 4 12 Question 5 13 Question 6 14 Question 7 15 Question 8 16 Question 9 17 Question 10 18 19 20 Single Amount or Annuity 21 Periodic Interest Rate 22 Number of Periods 23 24 25 Present Value of Single Amount 26 27 Future Value of Single Amount 28 29 Future Value of An Annuity...
luck! Question 3 All else being equal, which of the following statement about time value of...
luck! Question 3 All else being equal, which of the following statement about time value of money is NOT correct? The higher the discount rate, the lower the present value The higher the interest rate, the higher the future value The higher the number of periods, the lower the present value The higher the present value, the lower the future value - Previous Quiz sa required precision (ie, the number of digits after the decimal point). Good luck! Question 4...
need answer to 21
(continued from the previous question) Which of the following is (approximately) the present value? (note: if your answer is within $50 from one of the answer choices, it's a rounding issue: select that answer. For example, if you got something like $8,140, select the answer "$8,103") $5,405 $8,103 $9,065 $6,047 $19,063 $20,016 -5 None of the above, because all the answers are more than $50 away from the correct present value ! You have been sued....
Problem 3 A) Pierluigi is trying to get a loan for $10,000 to start a business as a financial advisor and is trying to decide between several options. (15 points) i) A $10,000 loan that needs to be paid back after 5 years with a 5% nominal annual interest rate, compounded monthly interest ) A $10,000 loan that needs to be paid back after 6 years, the first 2 years there is no and after the annual effective interest rate...
Problem 3 B) Pierluigi is trying to get a loan for $10,000 to start a business as a financial advisor and is trying to decide between several options. (15 points) DA $10,000 loan that needs to be paid back in 6 years with a 6 % nominal annual interest rate, compounded monthly i) A $10,000 loan that needs to be paid back in 7 years, which accrues no interest during the first 2 years but has a 10% effective interest...
The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. bevinning of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year An annuity that pays...
I need help on question 2.
MODULE IV: TIME VALUE OF MONEY INTRODUCTION The time value of money analysis has many a lysis has many applications, ranging from setting hedules for paying off loans to decisions about whether to invest in a partie financial instrument. First, let's define the following notations: I = the interest rate per period Na the total number of payment periods in an annuity PMT = the annuity payment made each period PV = present value...
part 1 given info present value = periodic interest rate = number of compounding periods = 190.00 0.080 6.00 What is the future value (single payment)? part 2 future value periodic interest rate = number of compounding periods = 301.51 0.080 6.00 what is the present value (single payment)? part 3 periodic payment periodic interest rate = number of compounding periods = 340.00 0.02 8.00 What is the future value of this annuity? part 4 present value (amount borrowed) =...
Time Value of Money Spreadsheet Example 4 Module IV Name: Date: 6 7 8 Question 1 9 Question 2 10 Question 3 11 Question 4 12 Question 5 13 Question 6 14 Question 7 15 Question 8 16 Question 9 17 Question 10 18 19 20 Single Amount or Annuity 21 Periodic Interest Rate 22 Number of Periods 23 24 25 Present Value of Single Amount 26 27 Future Value of Single Amount 28 29 Future Value of An Annuity...
luck! Question 3 All else being equal, which of the following statement about time value of money is NOT correct? The higher the discount rate, the lower the present value The higher the interest rate, the higher the future value The higher the number of periods, the lower the present value The higher the present value, the lower the future value - Previous Quiz sa required precision (ie, the number of digits after the decimal point). Good luck! Question 4...
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