Homework Answers
For an annuity of $1 growing at 'g' per annum, with discount rate 'r' for 't' years, we calculate the Present value as:
In our case, our annuity of $1000 grows at 30% per annum. We make the investment for 5 years and use 6% as discount rate. So, the present value is given by:
The cash flow diagram for the given problem is:
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This year I intend to invest $1,000. For years 2, 3, 4, and 5 I intend to invest $1,300, $1,690, $2,197 and $2856.10 re...
If you invest $2,000 today, withdraw $1,000 in 3 years, deposit $3,000 in 5 years, deposit...
If you invest $2,000 today, withdraw $1,000 in 3 years, deposit $3,000 in 5 years, deposit $1,500 in 8 years. (a) Draw the cash flow diagram from your perspective. (b) How much will you withdraw if you decide to withdraw the entire sum three years after the final deposit and the interest rate is 7%. Show your calculations to get credit. (c) Find the present worth equivalent using the actual cash flows and interest rate of 7%. Show your calculations...
1. If I invest $1,000 at the start of each year every year for the next...
1. If I invest $1,000 at the start of each year every year for the next four years in an account paying 4% annual interest, how much will I receive at the end of 4 years? (ordinary annuity vs. annuity due)
•A intends to invest a level amount of money equal to $1,000 into a fund at...
•A intends to invest a level amount of money equal to $1,000 into a fund at the end of every year for 20 years. This fund is projected to earn an annual effective interest rate of 10%. At the end every year, A will have to withdraw the interest accrued during that year and reinvest it at an annual effective rate of 6%. •Assume that A wants the annual yield rate of the above investment scheme to be 8% over...
QUESTION 5 Consider the following sequence of year-end cash flows: EOY 1 2 4 Cash Flow $1,000 $1,100 $1,200 $1,300...
QUESTION 5 Consider the following sequence of year-end cash flows: EOY 1 2 4 Cash Flow $1,000 $1,100 $1,200 $1,300 $1,400 What is the uniform annual equivalent (to the nearest whole dollar) if the interest rate is 2% per year? (Do not enter a dollar sign $ with your answer.)
QUESTION 5 Consider the following sequence of year-end cash flows: EOY 1 2 4 Cash Flow $1,000 $1,100 $1,200 $1,300 $1,400 What is the uniform annual equivalent (to the nearest...
Will rate! You are planning to withdraw $100 in Year 1, $150 in Year 3, and...
Will rate!
You are planning to withdraw $100 in Year 1, $150 in Year 3, and $200 in Year 5. How much should you invest today, at an interest rate of 5%? Draw a cash flow diagram for your understanding You need not submit the cash flow diagram Choose the most appropriate model using functional notations that will answer the question ap-100(P/F, 5% 1) +150P/F 5%, 2).200 pyp.5%3) What is the correctly calculated value for how much you should invest...
3.) A student is borrowing $2000 per year for 3 years. The loan will be repaid 2 years later at a 5% interest rate. a)...
3.) A student is borrowing $2000 per year for 3 years. The loan will be repaid 2 years later at a 5% interest rate. a) Draw the cash flow diagram b) Compute how much will be repaid.
You are going to invest $1,000 at the end of each year for five years. Given...
You are going to invest $1,000 at the end of each year for five years. Given an interest rate, you can find the future value of this investment by: 1. Adding the cash flows together and finding the future value of the sum. II. Applying the proper future value factor to each cash flow, then adding up these future values. III. Finding the present value of the sum of the payments. IV. Finding the present value of each cash flow,...
Charlie Stone wants to retire in 30 years, and he wants to have an annuity of...
Charlie Stone wants to retire in 30 years, and he wants to have an annuity of $1,000 a year for 20 years after retirement Charlie wants to receive the first annuity payment at the end of the 30th year. Using an interest rate of 10%, how much must Charlie invest today in order to have his retirement annuity (round to the nearest S10) A cash flow series is increasing geometrically at a rate of 6% per year. The initial cash...
b) Using the tables provided in Appendix A, if you would like to receive $1,000 per...
b) Using the tables provided in Appendix A, if you would like to receive $1,000 per year for the next five years, how much would you have to invest today, assuming 6% interest. LO3. How do discounted cash flow methods work? a) ABC Company is considering a project with an initial investment of $600,000 that is expected to produce cash inflows of $100,000 per year for 5 years. The required rate of return is 14%. i) What is the NPV...
a. You are saving for retirement 10 years from now. How much should you invest today...
a. You are saving for retirement 10 years from now. How much should you invest today so you will have an annuity of $20,000 per year for 20 years starting from the 11" year? b. If you were to invest $10,000 today @6%, how much would you have at the end of 15 years? C. You are planning to save $100,000 for a yacht purchase 5 years from now. If you believe you can earn an 8% rate of return,...
QUESTION 5 Consider the following sequence of year-end cash flows: EOY 1 2 4 Cash Flow $1,000 $1,100 $1,200 $1,300 $1,400 What is the uniform annual equivalent (to the nearest whole dollar) if the interest rate is 2% per year? (Do not enter a dollar sign $ with your answer.)
QUESTION 5 Consider the following sequence of year-end cash flows: EOY 1 2 4 Cash Flow $1,000 $1,100 $1,200 $1,300 $1,400 What is the uniform annual equivalent (to the nearest...
Will rate!
You are planning to withdraw $100 in Year 1, $150 in Year 3, and $200 in Year 5. How much should you invest today, at an interest rate of 5%? Draw a cash flow diagram for your understanding You need not submit the cash flow diagram Choose the most appropriate model using functional notations that will answer the question ap-100(P/F, 5% 1) +150P/F 5%, 2).200 pyp.5%3) What is the correctly calculated value for how much you should invest...
3.) A student is borrowing $2000 per year for 3 years. The loan will be repaid 2 years later at a 5% interest rate. a) Draw the cash flow diagram b) Compute how much will be repaid.
You are going to invest $1,000 at the end of each year for five years. Given an interest rate, you can find the future value of this investment by: 1. Adding the cash flows together and finding the future value of the sum. II. Applying the proper future value factor to each cash flow, then adding up these future values. III. Finding the present value of the sum of the payments. IV. Finding the present value of each cash flow,...
Charlie Stone wants to retire in 30 years, and he wants to have an annuity of $1,000 a year for 20 years after retirement Charlie wants to receive the first annuity payment at the end of the 30th year. Using an interest rate of 10%, how much must Charlie invest today in order to have his retirement annuity (round to the nearest S10) A cash flow series is increasing geometrically at a rate of 6% per year. The initial cash...
a. You are saving for retirement 10 years from now. How much should you invest today so you will have an annuity of $20,000 per year for 20 years starting from the 11" year? b. If you were to invest $10,000 today @6%, how much would you have at the end of 15 years? C. You are planning to save $100,000 for a yacht purchase 5 years from now. If you believe you can earn an 8% rate of return,...
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