Question
Q1. You join a gym for 2 years on a payment plan that requires you to pay $1,000 today, $140 in 12 months from today
Q1. You join a gym for 2 years on a payment plan that requires you to pay $1,000 today, $140 in 12 months from today and $690 in 18 months from today. Alternatively you could pay $1800 today. If the interest rate is 12.4%p.a. compounding monthly, what is the advantage that the payment plan has over the upfront payment?
(expressed in present day value rounded to the nearest cent; do not show $ sign or comma separators; if the payment plan is more costly than $1,800 today, your answer will show a negative eg. -300.35
Q2. Your business will pay you distributions of $13,000 in 7 months and another $8,000 in 19 months. If the discount rate is 7% per annum (compounding monthly) for the first 10 months, and 14% per annum (compounding monthly) for the next 9 months, what single amount received today would be equal to the two proposed payments? (answer to nearest whole dollar; do not use $ sign or commas)
Q3. A prize pays $15,000 each quarter for 5 years (20 payments)commencing in exactly 6 months time. If the appropriate discount rate is 13.8% p.a compounding quarterly, the value of the prize today is (round to nearest cent; dont use $ sign or commas):
[HINT: the annuity is deferred]
a.$853273.18
b. $214153.78
c. $45469.87
d. $207011.87
Q4. Payments of $9,000 per quarter are deposited into a fund at the end of each quarter for 4 years. If interest is 13.2% p.a. compounding quarterly, the size of the fund at the end of 4 years will be (to nearest dollar but dont include $ sign or commas):
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