Question
1.How much do you have to deposit today so that beginning 11 years from now you can withdraw $6,000 a year for the next 4
1.How much do you have to deposit today so that beginning 11 years from now you can withdraw $6,000 a year for the next 4 years (periods 11 through 14) plus an additional amount of $12,000 in the last year (period 14)? Assume an interest rate of 9 percent.
The amount of money you have to deposit today is $ (Round to the nearest cent.)
2. Don Draper has signed a contract that will pay him $70,000 at the end of each year for the next 6 years, plus an additional $130,000 at the end of year 6. If 8 percent is the appropriate discount rate, what is the present value of this contract?
The present value of the contract is $. (Round to the nearest cent.)
3. Selma and Patty Bouvier are twins and both work at the Springfield DMV. Selma and Patty Bouvier decide to save for retirement, which is 35 years away. They'll both receive an annual return of 11 percent on their investment over the next 35 years. Selma invests $2,100 per year at the end of each year only for the first 10 years of the 35-year periodfor a total of $21,000 saved. Patty doesn't start saving for 10 years and then saves $2,100 per year at the end of each year for the remaining 25 yearsfor a total of $52,500 saved. How much will each of them have when they retire?
a.How much will Selma have when she retires?$ (Round to the nearest cent.)
b.How much will Patty have when she retires? $ (Round to the nearest cent.)
4.
At a discount rate of 12.50%, find the present value of a perpetual payment of $6,500 per year. If the discount rate were lowered to 6.25%, half the initial rate, what would be the value of the perpetuity?
a. If the discount rate were 12.50%, the present value of the perpetuity is $. (Round to the nearest cent.)
b.If the discount rate were lowered to 6.25%, half the initial rate, the present value of the perpetuity is $ (Round to the nearest cent.)
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