Question
All Foods Market, Inc. has an obligation to pay its supplier $363,000 on December 31, 2052, two years from today. Suppose that the manager of
All Foods Market, Inc. has an obligation to pay its supplier $363,000 on December 31, 2052, two years from today. Suppose that the manager of the firm wants to prepare for this upcoming payment. If the firm can earn a risk-free rate of 10% per year, what is the amount of funds needed today, December 31, 2050? *For full credit, you must show the steps/calculation toward your results.
b) [10 marks] Today is December 31, 2040. You expect to receive two payments, $20,000 at the end of 2042 and $30,000 at the end of 2044. Upon receiving each payment, you will invest them at 6% per year until the end of 2047. How much will be the value of your investment at the end of 2047? *For full credit, you must show the steps/calculation toward your results.
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