Homework Answers
| Cost of perpetuity cash inflow is the present value of future cash inflows. | |||||
| Interest rate | = | Annual cash inflow | / | Initial cost | |
| = | $ 99 | / | $ 1,100 | ||
| = | 9.00% | ||||
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A local bank will pay you $99 at the end of each year for your lifetime if you deposit $1,100 in the bank today....
A local bank advertises the following deal: Pay us $100 at the end of each year...
A local bank advertises the following deal: Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever. a. Calculate the present value of your payments to the bank if the interest rate is 6.75%. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Present value b. What is the present value of a $100 perpetuity deferred for 10...
You deposit $1,100 at the end of each year into an account paying 9.1 percent interest....
You deposit $1,100 at the end of each year into an account paying 9.1 percent interest. (a) How much money will you have in the account in 19 years? (b) How much will you have if you make deposits for 38 years?
a. A company promises to pay you, and your descendants, $400 per year forever. Your required...
a. A company promises to pay you, and your descendants, $400 per year forever. Your required rate of returm is 10 percent. What is the most you would pay for this perpetuity? PV-Payment/Interest rate b. Future Value: If you deposit $12,000 in the bank today, what will it be worth in 15 years at9 percent compound growth? What is the formula for this problem? c. Present Value: If you plan to receive $12,000 from the bank in 15 years, what...
Finance math problems 6 You plan to deposit $4,500 at the end of each of the...
Finance math problems
6 You plan to deposit $4,500 at the end of each of the next 20 years into an account paying 9.7 percent interest a. How much money will you have in the account in 20 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. How much will you have if you make deposits for 40 years? (Do not round intermediate calculations and round your answer to 2 decimal places,...
You Save Bank has a unique account. If you deposit $5,750 today, the bank will pay...
You Save Bank has a unique account. If you deposit $5,750 today, the bank will pay you an annual interest rate of 6 percent for 3 years, 6.6 percent for 2 years, and 7.3 percent for 6 years. How much will you have in your account in 11 years?
You just made a one-time deposit (today) of $7,500 into an account paying an interest rate...
You just made a one-time deposit (today) of $7,500 into an account paying an interest rate of 12 percent per year. Required: How long will it be before you have enough in the account to buy a $28,000 car? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Your bank offers 3-year certificates of deposit with a stated rate of interest of 11.82 %...
Your bank offers 3-year certificates of deposit with a stated rate of interest of 11.82 % p.a., compounded quarterly. Your cousin (who works at Acme Bank and Trust, a competitor) wants to know what stated rate of interest you would require from them in order to switch your business to their bank. Acme's CD's are compounded on a monthly basis. What is the minimum stated interest rate you should ask for from Acme in order to make you indifferent to...
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of...
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. A perpetuity continues for a fixed time period. A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. The principal amount of a perpetuity is repaid as a lump-sum amount. In a perpetuity, returns in the...
23. What is the future value at the end of year 28 of depositing $5,000 today, $3,500 at the end of years 1, 2 and 3, $...
23. What is the future value at the end of year 28 of depositing $5,000 today, $3,500 at the end of years 1, 2 and 3, $5,000 at the end of years 4, 5, 6 and 7 and $4,250 at the end of years 8, 9, 10, 11 and 12 into an account that pays 9.5% p.a.? (No deposits will be made into the account after year 12). 24. If you wanted to fund a scholarship that would pay $12,500...
Suppose that today you deposit the amount of $550 in a bank. How much would the...
Suppose that today you deposit the amount of $550 in a bank. How much would the deposit grow to at the end of year 16 if the interest rate is 7.00%? $ Place your answer in dollars and cents. Do not include a dollar sign or comma in your answer. Work your analysis with at least four decimal places of accuracy.
A local bank advertises the following deal: Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever. a. Calculate the present value of your payments to the bank if the interest rate is 6.75%. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Present value b. What is the present value of a $100 perpetuity deferred for 10...
a. A company promises to pay you, and your descendants, $400 per year forever. Your required rate of returm is 10 percent. What is the most you would pay for this perpetuity? PV-Payment/Interest rate b. Future Value: If you deposit $12,000 in the bank today, what will it be worth in 15 years at9 percent compound growth? What is the formula for this problem? c. Present Value: If you plan to receive $12,000 from the bank in 15 years, what...
Finance math problems
6 You plan to deposit $4,500 at the end of each of the next 20 years into an account paying 9.7 percent interest a. How much money will you have in the account in 20 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. How much will you have if you make deposits for 40 years? (Do not round intermediate calculations and round your answer to 2 decimal places,...
Your bank offers 3-year certificates of deposit with a stated rate of interest of 11.82 % p.a., compounded quarterly. Your cousin (who works at Acme Bank and Trust, a competitor) wants to know what stated rate of interest you would require from them in order to switch your business to their bank. Acme's CD's are compounded on a monthly basis. What is the minimum stated interest rate you should ask for from Acme in order to make you indifferent to...
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. A perpetuity continues for a fixed time period. A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. The principal amount of a perpetuity is repaid as a lump-sum amount. In a perpetuity, returns in the...
23. What is the future value at the end of year 28 of depositing $5,000 today, $3,500 at the end of years 1, 2 and 3, $5,000 at the end of years 4, 5, 6 and 7 and $4,250 at the end of years 8, 9, 10, 11 and 12 into an account that pays 9.5% p.a.? (No deposits will be made into the account after year 12). 24. If you wanted to fund a scholarship that would pay $12,500...
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