Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Are these correct? 1.If interest rates are 8 percent, what is the future value of a $400 annuity payment over six years? Unless otherwise directed,

Are these correct?

1.If interest rates are 8 percent, what is the future value of a $400 annuity payment over six years? Unless otherwise directed, assume annual compounding periods.

Recalculate the future value at 6 percent interest and 9 percent interest.

400/.08*((1+.08)^6-1)=$2,934.37

400/.06*((1+.06)^6-1)=$2,790.13

400/.09*((1+.09)^6-1)=$3,009.33

2.If interest rates are 5 percent, what is the present value of a $900 annuity payment over three years? Unless otherwise directed, assume annual compounding periods.

Recalculate the present value at 10 percent interest and 13 percent interest.

900/.05*((1-1)(1+.05)^3)=$2,450.92

900/.10*((1-1)(1+.10)^3)=$2,238.17

900/.13*((1-1)(1+.13)^3)=$2,125.04

3.What is the present value of a series of $1150 payments made every year for 14 years when the discount rate is 9 percent?

Recalculate the present value using discount rate of 11 percent and 12 percent.

1150/.09*(1-1/(1+.09)^14)=$8,954.07

1150/.11*(1-1/(1+.11)^14)=$8,029.15

1150/.12*(1-1/(1+.12)^14)=$7,622.39

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Roberts, Hamdi Driss

8th Canadian Edition

01259270114, 9781259270116

More Books

Students also viewed these Finance questions

Question

What is a polytomous variable?

Answered: 1 week ago

Question

_hscuss the app phases m your or

Answered: 1 week ago