Present Value and Future Value Questions Response
Present Value and Future Value Questions Response
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Chrome File Edit View History Bookmarks People Window Help Г. 4A ()) 100% CO A Tue Oct 15 9:50:07 PM Q N Canvas | California State Unive x | Chapter 6 Questions and Probl X WileyPLUS Х + + → C edugen.wileyplus.com/edugen/student/mainfr.uni C WileyPLUS: MyWileyPLUS | Help Contact Us Log Out WileyPLUS Parrino, Fundamentals of Corporate Finance, 4e FINANCIAL MANAGEMENT (FIN 303) Home Read, Study & Practice Assignment Gradebook ORION Downloadable eTextbook Read, Study & Practice > Chapter 6. Discounted Cash Flows and Valua Select a Section Select a Study Objective 1 FULL SCREEN PRINTER VERSION BACK NEXT ANSWER 6.14 Perpetuity: Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,000 a year forever, starting when he retires. If he can earn 6.5 percent annually, how much does your grandfather need to invest to produce the desired cash flow? 6.15 Perpetuity: Calculate the annual cash flows for each of the following investments: (a) $250,000 invested at 6 percent. ANSWER (b) $50,000 invested at 12 percent. ANSWER CHAPTER RESOURCES ve Textbook Chapter Opener 6.1 Multiple Cash Flows 6.2 Level Cash Flows: Annuities and Perpetuities 6.3 Cash Flows That Grow at a Constant Rate 6.4 The Effective Annual Interest Rate Summary of Learning, Objectives Summary of Key. Equations Self-Study Problems Discussion Questions Questions and Problems Sample Test Problems Appendix: Deriving the Formula for the Present Value of an Ordinary Annuity Ethics Case: America’s Ailing Drug Prices ORION: Build your Proficiency. Narrated PowerPoints Solution Walkthrough Videos Learning By Doing, Interactive Tutorials Excel Resources Excel Walkthrough Videos Additional Resources (c) $100,000 invested at 10 percent. ANSWER 6.16 Effective annual interest rate: Marshell Chavez bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the dealer at an APR of 4.9 percent for four years. What is the effective annual interest rate (EAR) if the loan payments are made monthly? 6.17 Effective annual interest rate: Cyclone Rentals borrowed $15,550 from a bank for three years. If the quoted rate (APR) is 6.75 percent, and the compounding is daily, what is the effective annual interest rate (EAR)? ANSWER 6.18 Growing perpetuity: You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $20,000 at the end of this year and subsequent payments that will grow at a rate of 3.4 percent annually. If you use a 9 percent discount rate for investments like this, what is the present value of this growing perpetuity? COURSE RESOURCES License Agreement | Privacy Policy | © 2000-2019 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc. Version 4.24.15.6 5 У OCT Dit ALLE A) 15 W 555-76 Аа 1s Х ME (30) Chrome File Edit View History Bookmarks People Window Help 4A Chapter 6. Discounted Cash Flows and Valua Select a Section Select a Study Objective 1 FULL SCREEN PRINTER VERSION BACK NEXT 6.8 Present value of an ordinary annuity: Dynamics Telecommunications Corp. has made an investment in another company that will guarantee it a cash flow of $22,500 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? 6.9 Future value of an ordinary annuity: Robert Hobbes plans to invest $25,000 a year at the end of each year for the next seven years in an investment that will pay him a rate of return of 11.4 percent. How much money will Robert have at the end of seven years? ANSWER + 6.10 Future value of an ordinary annuity: Cecelia Thomas is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $3,000 every year in an IRA account, beginning at the end of this year until she reaches age 65. If the IRA investment will earn 9.75 percent annually, how much will she have in 40 years, when she turns 65? CHAPTER RESOURCES ve Textbook Chapter Opener 6.1 Multiple Cash Flows 6.2 Level Cash Flows: Annuities and Perpetuities 6.3 Cash Flows That Grow at a Constant Rate 6.4 The Effective Annual Interest Rate Summary of Learning, Objectives Summary of Key. Equations Self-Study Problems Discussion Questions Questions and Problems Sample Test Problems Appendix: Deriving the Formula for the Present Value of an Ordinary Annuity Ethics Case: America’s Ailing Drug Prices ORION: Build your Proficiency. Narrated PowerPoints Solution Walkthrough Videos Learning By Doing, Interactive Tutorials Excel Resources Excel Walkthrough Videos Additional Resources 6.11 Future value of an annuity due: Refer to Problem 6.10. If Cecelia invests at the beginning of each year, how much will she have at age 65? ANSWER 6.12 Computing annuity payment: Kevin Winthrop is saving for an Australian vacation in three years. He estimates that he will need $5,000 to cover his airfare and all other expenses for a week-long holiday in Australia. If he can invest his money in an S&P 500 equity index fund that is expected to earn an average annual return of 10.3 percent over the next three years, how much will he have to save every year if he starts saving at the end of this year? 6.13 Computing annuity payment: The Elkridge Bar & Grill has a seven-year loan of $23,500 with Bank of America. It plans to repay the loan in seven equal installments starting today. If the rate of interest is 8.4 percent, how much will each payment be? ANSWER 6.14 Perpetuity: Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,000 a year forever, starting when he retires. If he can earn 6.5 percent annually, how much does your grandfather need to invest to produce the desired cash flow? COURSE RESOURCES License Agreement | Privacy Policy | © 2000-2019 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc. Version 4.24.15.6 1 5 6 OCT 49 E465 15 …. W Аа 555-16 FIS Х 12 (30)
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