Question

if you make the following deposits ( payments) : EOY 0 payment is 9600 $, EOY...

if you make the following deposits ( payments)
: EOY 0 payment is 9600 $, EOY 1-10 payments are 12000 $ ( 10 equal payments), where : EOY : End of year.
Assuming that interest rate is 10% per year compounded annually, what would be the equivalent present amount to these payments.

Homework Answers

Answer #1

Lets First Calculate Present value of Periodic payment

Present Value of a periodic payment is given by :

PV = (P/r)(1 - 1/(1 + r)n)

where PV = Present value , P = periodic payment = 12000, r = interest rate = 10% = 0.10 and n = time period = 10

=> PV = (12000/0.10)(1 - 1/(1 + 0.10)10)

Now, Lets Calculate Present value(PV) of EOY 0 payment which is that only

So, PV of EOY 0 is equal to 9600 only

Hence Net Present value = 9600 + (12000/0.10)(1 - 1/(1 + 0.10)10) = 83334.81

Hence, the equivalent present amount to these payments = $83334.81

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. For the next 6 years, you pan to make equal quarterly deposits of $600.00 into...
1. For the next 6 years, you pan to make equal quarterly deposits of $600.00 into an account paying 8% compounded quarterly. How much will be the total you have at the end of the time? 2. How much money will you have to deposit now if you wish to have $5,000 at the end of 8 years. Interest is to be at the rate of 6% compounded semiannually? 3. In the California “Million Dollar Lottery” a winner is paid...
Question 1 "Consider the following deposits made into a savings account that earns a constant interest...
Question 1 "Consider the following deposits made into a savings account that earns a constant interest compounded annually. 'An' represents the actual deposits made at the end of year n. 'Pn' represents the present value of the deposit in year n. The present value 'Pn' of $790 in year 2 is $707.40. Assuming there are only 4 deposits made, calculate the total amount in the savings account at the end of year 4. 'An' in $ (Years 0 through 4):...
One year from today you must make a payment of $10,000. To prepare for this payment,...
One year from today you must make a payment of $10,000. To prepare for this payment, you plan to make three equal quarterly deposits (at the end of Quarters 1, 2 and 3) in a bank that pays 6& nominal interest compounded quarterly. How large must each of the three payments be? Describe how you reach your final answer.
Assume that you would like to make 6 yearly deposits for your kid’s college tuition fee...
Assume that you would like to make 6 yearly deposits for your kid’s college tuition fee starting today. The initial deposit for today is $10000 dollars and each year the amount increases by $1000. The interest rate is assumed to be 8% per year. a) Draw the cash flow diagram (CFD). b) Assuming that your kind needs the tuition money as a lump-sum amount, 10 years from now. Find the total amount of money that will be accumulated in the...
Consider the following deposits made into a savings account that earns a constant interest compounded annually....
Consider the following deposits made into a savings account that earns a constant interest compounded annually. 'An' represents the actual deposits made at the end of year n. 'Pn' represents the present value of the deposit in year n. The present value 'Pn' of $750 in year 2 is $667.40. Assuming there are only 4 deposits made, calculate the total amount in the savings account at the end of year 4. 'An' in $ (Years 0 through 4): 0 440...
You plan to make five deposits of $1,000 each, one every 6 months, with the first...
You plan to make five deposits of $1,000 each, one every 6 months, with the first payment being made in 6 months. You will then make no more deposits. If the bank pays 7% nominal interest, compounded semiannually, how much will be in your account after 3 years? Round your answer to the nearest cent. $   One year from today you must make a payment of $11,000. To prepare for this payment, you plan to make two equal quarterly deposits...
You make two separate deposits in a bank. The first amount of $1,200 deposited today earns...
You make two separate deposits in a bank. The first amount of $1,200 deposited today earns a 6% interest per year for 10 years, and the second amount of $800 to be deposited two years from now would earn a 5% interest per year for the next 8 years. What would be your total future value at the end of year 10? What is the future value of an annuity payment of $1250 over 5 years if interest rates are...
You are considereding an investment that promises to make 10 payments of $5000. The payments will...
You are considereding an investment that promises to make 10 payments of $5000. The payments will be made every two years. The only twist is that the first payment will be received in one year. If you required a return of 10% per year compounded semi-annually, how much would you be willing to pay for this investment? (using casio fx-9750GII)
You plan to make five deposits of $1,000 each, one every 6 months, with the first...
You plan to make five deposits of $1,000 each, one every 6 months, with the first payment being made in 6 months. You will then make no more deposits. If the bank pays 7% nominal interest, compounded semiannually, how much will be in your account after 3 years? Do not round intermediate calculations. Round your answer to the nearest cent.   One year from today you must make a payment of $6,000. To prepare for this payment, you plan to make...
You want to make equal deposits at the end of each month for 10 years into...
You want to make equal deposits at the end of each month for 10 years into an account with annual interest rate 8% compounded monthly, and then withdraw $200 at the end of each month for the following 15 years, ending with a zero balance. How much do your monthly deposits need to be?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT