Question
You have just won a lottery totaling $4,000,000. You learn that you will receive a check in the amount of $200,000 at the end of
You have just won a lottery totaling $4,000,000. You learn that you will receive a check in the amount of $200,000 at the end of each of the next 20 years. What amount have you really won? That is, what is the present value of the $200,000 checks you will receive over the next 20 years? (assuming an appropriate interest rate of 10%). Computation of the Interest Rate: Many shoppers use credit cards to make purchases. When you receive the statement for payment, you may pay the total amount due or you may pay the balance in a certain number of payments. For example, assume you receive a statement from MasterCard with a balance due of $528.77. You may pay it off in 12 equal monthly payments of $50 each, with the first payment due one month from now. What rate of interest would you be paying? Computation of a Periodic Rent: The Remmers have saved $36,000 to finance their daughters college education. They deposited the money where it earns 4% interest compounded semiannually. What equal amounts can their daughter withdraw at the end of every 6 months during her 4 college years, without exhausting the fund? Find the present value of an investment in equipment if it is expected to provide annual savings of $57,000 for 10 years and to have a resale value of $69,000 at the end of that period. Assume an interest rate of 15% and that savings are realized at year end. On January 1, 2017, Coronado Industries decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $70000 at 10% each January 1 beginning in 2017. What will be the balance in the fund, on January 1, 2022 (one year after the last deposit)?
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