Suppose you are offered $50 now or $100 in 3 years. Let the discount (interest) rate be 4 percent. Calculate the present value of the $100 option. Which option should you take if your goal is to choose the option with the larger present value?
b. What is the present value of an infinite earnings stream of $150 if your discount rate is 8%? What if your discount rate is %2?
Suppose you are offered $50 now or $100 in 3 years. Let the discount (interest) rate...
1. You will receive $100 per year for 10 years. The discount rate is 10%. What is the present value of this stream? 2. Using the previous information, assume now the 100 will increase at a 5% per year from year 1. What is the new present value? 3. Now assume compute the present value for the same information using a perpetuity without and with growth. Compare the 4 present values. What would you rank those? 4. You look at...
Your grandmother promised to give you $100 today and $100 a year from now, 2 years from now, 3 years from now, 4 years from now, and 5 years from now. Given that the current interest rate is 3% compounded annually, what is the present value of this stream of cash flows?
(Present-value comparison) You are offered $1,400 today, $5,000 in 12 years, or $29,000 in 20 years. Assuming that you can earn 13 percent on your money, which offer should you choose? a. What is the present value of $29,000 in 20 years discounted at 13 percent interest rate?
You will receive $4,500 three years from now. The discount rate is 13 percent. a. What is the value of your investment two years from now? Multiply $4,500 × .885 (one year’s discount rate at 13 percent). (Round your answer to 2 decimal places.) b. What is the value of your investment one year from now? Multiply your rounded answer to part a by .885 (one year’s discount rate at 13 percent). (Round your answer to 2 decimal places.)
Suppose that you invest $100 today in a risk-free investment and let the 5 percent annual interest rate compound. Instructions: Round your answer to the nearest dollar. What will be the value of your investment 6 years from now? $.
You will receive $100 from a zero-coupon savings bond in 3 years. The nominal interest rate is 7.80%. a. What is the present value of the proceeds from the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present Value: b. If the inflation rate over the next few years is expected to be 2.80%, what will the real value of the $100 payoff be in terms of today’s dollars? (Do not round intermediate calculations. Round...
Assume that you wish to make annual deposits into a savings account. The interest rate offered by the bank is 13%, and you plan to save for the next 13 years. If your goal is for the present value of your savings to be equal to $3746, how much money must you deposit every year?
When you retire 50 years from now, you want to have $2,000,000 million. You think you can earn an average of 8 percent on your investments. To meet your goal, you are trying to decide whether to deposit a lump sum today, or to wait and deposit a lump sum 2 years from today. How much more will you have to deposit as a lump sum if you wait for 2 years before making the deposit? Group of answer choices...
Suppose that you will receive annual payments of $13,000 for a period of 10 years. The first payment will be made 5 years from now. If the interest rate is 7%, what is the present value of this stream of payments? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value
9. You are offered an investment with a quoted annual interest rate of 6.75% with quarterly compounding of interest. What is your effective annual interest rate? 10. You are offered an annuity that will pay $15,000 per year for 20 years (the first payment will occur one year from today). If you feel that the appropriate discount rate is 3%, what is the annuity worth to you today? 11. If you deposit $6,500 per year (each deposit is made at...