2.

The four actors below have just signed a contract to star in a dramatic movie about relationships among hospital doctors. Filming is expected to take two years to complete. Each person signs independent contracts today with the following terms:

	Contract Terms
Contract Amount	Payment Date
Derek	$ 580,000	2 years
Isabel	620,000	3 years
Meredith	490,000	Today
George	480,000	1 year

Required:

1-a. Assuming an annual discount rate of 8%, calculate the present value of the contract amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1)

1-b. Which of the four actors is actually being paid the most?

Present Value
Derek	$487,654.68selected answer incorrect
Isabel	520,737.39selected answer incorrect
Meredith	490,000.00selected answer correct
George	444,444.44selected answer correct

4

You would like to start saving for retirement. Assuming you are now 30 years old and want to retire at age 50, you have 20 years to watch your investment grow. You decide to invest in the stock market, which has earned about 11% per year over the past 80 years and is expected to continue at this rate. You decide to invest $1,000 at the end of each year for the next 20 years.

Required:

Calculate how much your accumulated investment is expected to be in 20 years.

Note: Use tables, Excel, or a financial calculator. Round your answer to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1)

Accumulated investment amount $________

7.

On June 30, 2024, Single Computers issued 4% stated rate bonds with a face amount of $300 million. The bonds mature on June 30, 2039 (15 years). The market rate of interest for similar bond issues was 3% (1.5% semiannual rate). Interest is paid semiannually (2.0%) on June 30 and December 31, beginning on December 31, 2024.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. Determine the price of the bonds on June 30, 2024.
2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method.

Table values are based on:
n =	30selected answer correct
i =	1.5%selected answer correct
Cash Flow	Amount	Present Value
Interest	$4,500,000selected answer incorrect	not attempted
Principal	$300,000,000selected answer correct	196,741,032selected answer incorrect
Price of bonds	not attempted

8.

On June 30, 2024, Fly-By-Night Airlines leased a jumbo jet from Boeing Corporation. The terms of the lease require Fly-By-Night to make 20 annual payments of $1,200,000 on each June 30. Generally accepted accounting principles require this lease to be recorded as a liability for the present value of scheduled payments. Assume that a 7% interest rate properly reflects the time value of money in this situation.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. At what amount should Fly-By-Night record the lease liability on June 30, 2024, assuming that the first payment will be made on June 30, 2025?
2. At what amount should Fly-By-Night record the lease liability on June 30, 2024, before any payments are made, assuming that the first payment will be made on June 30, 2024?

able, Excel, or calculator function	PVA of $1selected answer correct
Payment:	$1,200,000selected answer correct
n =	20selected answer correct
i =	7%selected answer correct
PV - 6/30/2024:	$16,207,920 incorrect

Table, Excel, or calculator function	PVAD of $1selected answer correct
Payment:	$1,200,000selected answer correct
n =	20selected answer correct
i =	7%selected answer correct
PV - 06/30/2024:	$12,712,812 incorrect

10.

Compute the value for each of the following independent situations.

Note: Use Excel or a financial calculator. Round your answers to 2 decimal places.

1. To save for their new childs college education, a couple places $27,800 in an account. What amount will accumulate in the account at the end of 18 years, assuming an interest rate of 7.25% compounded annually?
2. An individual has just inherited a piece of land. The individual plans to hold the land for three years and then expects the land to sell for $207,000. What is the value today of inheriting the land, assuming an interest rate of 8.5% compounded annually?
3. To save money for the down payment on a house, an individual places $6,400 in an account at the end of each quarter. What amount will accumulate in the account at the end of four years, assuming an interest rate of 9.75% compounded quarterly?
4. To purchase a car, an individual agrees to pay $1,080 at the end of each month for the next six years. What is the cost of the car today, assuming an interest rate of 6.5%.
5. To help repay debt that will come due in 12 years, a company places $25,600 in an account at the beginning of each six-month period. What amount will accumulate in the account at the end of 12 years, assuming an interest rate of 4.5% compounded semiannually?
6. To rent office space, a company signs a lease agreeing to pay $3,900 at the beginning of each month for the next three years. What is the cost today of the lease, assuming an interest rate of 5% compounded monthly?

1. Future Value	$97,993.26selected answer correct
2. Present Value	$162,061.97selected answer correct
3. Future Value	not attempted
4. Present Value	not attempted
5. Future Value	$225,195.74selected answer incorrect
6. Present Value	$64,446.06 incorrect