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The present value of an sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which
The present value of an sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV) Assume that all annuities eam the same positive interest rate. O An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the end of each year An annuity that pays $1,000 at the beginning of each year An annuity that pays $500 at the beginning of every six months An ordinary annuity selling at $3,454.01 today promises to make equal payments at the end of each year for the next 12 years (N). If the annuity's appropriate interest rate (1) remains at 8.00% during this time, the annual annuity payment (PMT) will be You just won the lottery. Congratulations! The jackpot is $10,000,000, paid in 12 equal annual payments. The first payment on the lottery Jackpot will be made today. In present value terms, you really won assuming annual interest rate of 8.00%. huities, and the need to compute either their expected rate of return or Consider the case of the duration Raul inhented an annuity worth $2,099.45 from his uncle. The annuity will pay him three equal payments of $800 at the end of each year. The annuity fund is offering a return of Raul's friend, Sadler, has hired a financial planner for advice on retirement. Considering Sadler's current expenses and expected future lifestyle changes, the financial planner has stated that once Sadler crosses a threshold of $4,862,232 in Savings, he will have enough money for retirement. Sadler has nothing saved for his retirement yet, so he plans to start depositing $85,000 in a retirement fund at a fixed rate of 7.00% at the end of each year. It will take years for Sadler to reach his retirement goal. 9. Perpetuities Perpetunities are also calle with an extended, or unlimited, We. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply A perpetuity continues for a fixed time period. In a perpetuity, returns--in the form of a series of identical cash flows-are earned A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. The principal amount of a perpetuity is repaid as a lump-sum amount. A local bank's advertising reads: "Give us $20,000 today, and we'll pay you $200 every year forever." If you plan to live forever, what annual interest rate will you earn on your deposit? O 1.00% O 1.20% O 0.90% 0 1.40% Oops! When you went in to make your deposit, the bank representative said the amount of required deposit reported in the advertisement was incorrect and should have read $30,000. This revision, which will the interest rate earned on your deposited funds, will adjust your earned interest rate to CENGAGE MINDIAP Assignment 05 - Time Value of Money The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next sx years: Year 2 $37,500 Annual Cash Flows Year 3 Year 4 $180,000 $450,000 Year 5 $750.000 Year 6 $375,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 6.5%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? O $1,571,023 $467,500 O $1825,000 0 $2,042,500 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Uneven Cash Flows Annuity Payments O Description Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her Salary increased by 15% every year in the last three years You deposit a certain equal amount of money every year into your pension fund. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange raded Fund Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest a O ooo O earch The present value of an sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV) Assume that all annuities eam the same positive interest rate. O An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the end of each year An annuity that pays $1,000 at the beginning of each year An annuity that pays $500 at the beginning of every six months An ordinary annuity selling at $3,454.01 today promises to make equal payments at the end of each year for the next 12 years (N). If the annuity's appropriate interest rate (1) remains at 8.00% during this time, the annual annuity payment (PMT) will be You just won the lottery. Congratulations! The jackpot is $10,000,000, paid in 12 equal annual payments. The first payment on the lottery Jackpot will be made today. In present value terms, you really won assuming annual interest rate of 8.00%. huities, and the need to compute either their expected rate of return or Consider the case of the duration Raul inhented an annuity worth $2,099.45 from his uncle. The annuity will pay him three equal payments of $800 at the end of each year. The annuity fund is offering a return of Raul's friend, Sadler, has hired a financial planner for advice on retirement. Considering Sadler's current expenses and expected future lifestyle changes, the financial planner has stated that once Sadler crosses a threshold of $4,862,232 in Savings, he will have enough money for retirement. Sadler has nothing saved for his retirement yet, so he plans to start depositing $85,000 in a retirement fund at a fixed rate of 7.00% at the end of each year. It will take years for Sadler to reach his retirement goal. 9. Perpetuities Perpetunities are also calle with an extended, or unlimited, We. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply A perpetuity continues for a fixed time period. In a perpetuity, returns--in the form of a series of identical cash flows-are earned A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. The principal amount of a perpetuity is repaid as a lump-sum amount. A local bank's advertising reads: "Give us $20,000 today, and we'll pay you $200 every year forever." If you plan to live forever, what annual interest rate will you earn on your deposit? O 1.00% O 1.20% O 0.90% 0 1.40% Oops! When you went in to make your deposit, the bank representative said the amount of required deposit reported in the advertisement was incorrect and should have read $30,000. This revision, which will the interest rate earned on your deposited funds, will adjust your earned interest rate to CENGAGE MINDIAP Assignment 05 - Time Value of Money The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next sx years: Year 2 $37,500 Annual Cash Flows Year 3 Year 4 $180,000 $450,000 Year 5 $750.000 Year 6 $375,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 6.5%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? O $1,571,023 $467,500 O $1825,000 0 $2,042,500 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Uneven Cash Flows Annuity Payments O Description Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her Salary increased by 15% every year in the last three years You deposit a certain equal amount of money every year into your pension fund. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange raded Fund Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest a O ooo O earch
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