Question
19. An annuity pays $100 per year for 5 years. What is the present value (PV) of this annuity given that the interest rate is
19. An annuity pays $100 per year for 5 years. What is the present value (PV) of this annuity given that the interest rate is 6% (APR) and the annuity is compounded annually?
20. Owen expects to receive $20,000 in one year from a trust fund. If a bank loans money at an interest rate of 6.0%, how much money can he borrow from the bank today on the basis of this information?
21. A lottery winner will receive $1 million at the end of each of the next ten years. What is the future value (FV) of her winnings at the time of her final payment, given that the interest rate is 9.0% per year?
22. Your firm just signed a contract to receive royalty forever. The royalty is estimated to be $1mil, every year, starting from next year. If the discount rate is 12%, what is the present value of the royalties from this contract?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started