Question

Assuming a 6% discount rate which choice is better:

Choice A: Get $500 today

Choice B: Receive $600 in 2 years

Choice C: Recieve $300 today, $200 in 2 years, $60 in 3 years

Answer #1

Proper solution is provided.

Assuming a discount rate of 6 percent, which of the following
has the highest cash value (present value at the date of purchase)?
Assume all purchase options below are as at the same date. There
will be a single cash flow for all of the alternatives (balloon
payments at the end of the financing period).
a.
$60,000 today
b.
$120,000 in 8 years
c.
$90,000 in 3 years
d.
$100,000 in 5 years

1.
Assuming the interest rate is 6 percent, which of the following
has the greatest present value?
$100 paid today plus $100 paid in one year plus $100 paid in
two years
$150 paid in one year plus $140 paid in two years
$300 paid in two years
$285 today
2.
Suppose the interest rate is 10 percent. Which of the following
payments has the largest present value?
You receive $75.13 today.
You receive $82.64 one year from today.
You...

if
the present value of $500 expected to be received 2 years from
today is $200. what is the discount rate ?

Assuming a discount rate of 10%, which of the following projects
will have the highest present value?(Choose)
1)-A €10,000 lump-sum payment received today
2)- A €5,000 payment received today plus €5,000 to be received in
one year
3)- A€10,000 lump-sum payment received in one year

Using a discount rate of five percent compounded semiannually,
what is the value today of the following cash flow stream?
($200), year
1
$200, year
2
$400, year
3
$800, year
5
$1,600, year 6
What is the value of each of these cash flows at the end of the
six years? Also, what is the relevant time for each?

Your company has made the following promises to a group of
employees who are retiring today: a cash flow of $300 1 year from
today, a cash flow of $500 2 years from today, a cash flow of $600
3 years from today? Assume all investments earn an annual interest
rate of 15%, compounded annually. (The discount rate is 15%). The
company has set aside $1100 to meet those obligations. Is the
retirement fund under-funded or over-funded?
a. under-funded
b. ...

If the interest rate is 8%, which of these investments would you
prefer?
Multiple Choice
A perpetuity of $250 a year starting in year 3.
A payment of $3,000 today.
A payment of $500 in year 1, a payment of $1,800 in year 3, and
a payment of $2,200 in year 6.
A payment of $350 a year for 30 years starting in year 2.

1. The appropriate discount rate
for the following cash flows is 6 percent compounded
quarterly.
Year
Cash
Flow
1
$900
2
600
3
0
4
1,100
Required:
What is the present value of the
cash flows?
A. $2,202.3
B. $2,254.36
C. $2,247.24
D. $1,129.24
E. $2,292.19
2. What is the future value of $500 in 23 years assuming an
interest rate of 9 percent compounded semiannually?
A. $665.56
B. $3,787.21
C. $3,628.94
D. $3,597.85
E. $594.59...

Your company has made the following promises to a group of
employees who are retiring today: a cash flow of $300 1 year from
today, a cash flow of $500 2 years from today, a cash flow of $600
3 years from today? Assume all investments earn an annual interest
rate of 10%, compounded annually. (The discount rate is 10%). The
instant after they pay the $300 in Year 1, how much is in the
account?

Sharon Smith will receive $1.25 million in 30 years. The
discount rate is 16%. As an alternative, she can receive $15,000
today. Which should she choose? Use Appendix B to calculate the
answer.
Multiple Choice
A_the $1.25 million dollars in 30 years.
B_$15,000 today.
C_she should be indifferent.
D_need more information.

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