questions 1-5

Chapter 12, Part 2 Question 1 Emesto's rich godfather promises to give him $65,000 on his 28th birthday, 16 years from now. If money Is worth 6.75% compounded annually. what Is today s value of his promise? $22,857.42 $10,437 89 $184,841.50 $22,587 42 Question 2 You win the lottery and will collect $10,000 at the end of each year for the next 25 years. Assuming that money Is worth 8.55% compounded annually, what is the value of your prize, In today's dollars? $110,631.63 $792,492 51 $250,000 $101,917.67 Question 3 You own a manufacturing business and are thinking about purchasing a labor-saving device at a cost of $225,000. The device will last 20 years and save you $1,800 per month in labor costs. You need to earn 9% compounded monthly on your money. What should you do, and why? Buy the device because it is worth more than the $225,000 cost. Buy the device because you will save a total of $$432,000, and the device costs only $225,000. Not buy the device because it Is worth less than the $225,000 cost. Question 4 Manuel wins a $4,000,000 sweepstakes prize. He is given the option of receiving $200,000 at the beginning of each year for 20 years (totaling $4,000,000) or receiving a one-time payment today of $2,400,000. Assuming that Manuel can earn 65% compounded annually on his money, what Is the real value of the annual payments? C $4,000,000 $2,203,701.45 $7,765,061.73 $2 346,942.04 Question 5 Five years ago you bought a 20-year 7 95% $1.000 bond. The bond pays Interest each 6 months. You want to sell the bond. You just received the 10th semiannual interest payment of $39.75. Similar bonds are being Issued that pay 8.15% semiannually. What is your bond worth today? C $986.50 $1,000 $982 86 $1.689.45 M