Question

1. You are offered an investment that will pay $100 annually for 7 years (the first payment will be made at the end of year 1) plus $2,900 at the end of year 7. If the appropriate discount rate is 5%, assume annual compounding, what is the investment worth to you today?

2. You are offered an investment that will pay $100 annually for 7 years (the first payment will be made at the end of year 1) plus $2,900 at the end of year 7. If the appropriate discount rate is 5%, assume semi-annual compounding, what is the investment worth to you today?

3. You are offered an investment that will pay $100 semi-annual for 7 years (the first payment will be made at the end of month 6) plus $2,900 at the end of year 7. If the appropriate discount rate is 5%, assume semi-annual compounding, what is the investment worth to you today?

Answer #1

1. You are offered an investment that will pay $100 annually for 7 years (the first payment will be made at the end of year 1) plus $2,900 at the end of year 7. If the appropriate discount rate is 5%, assume annual compounding, what is the investment worth to you today?

The investment is worth $2,639.6131971774 to us today

2. Effective annual rate, r = (1 + 0.05/2)^2 - 1

r = 0.050625

3. n = 7 * 2 = 14

r = 0.05/2 = 0.025

You have been offered a 7-year investment at a price of $50,000.
It will pay $5,000 at the end of Year 1, $10,000 at the end of Year
2, and $15,000 at the end of Year 3, plus a fixed but currently
unspecified cash flow, X, at the end of Years 4 through 7. The
payer is essentially riskless, so you are sure the payments will be
made, and you regard 9% as an appropriate rate of return on
riskless...

You have been offered an investment that promises to pay out
$20,000 at the end of the year, followed by payments of $30,000,
$40,000, and $50,000 at the end of the subsequent years. Yields in
the market are expected to steadily increase over the next year so
that the appropriate discount rate is 6% for the first year, 7% for
the second year, 8% for the third year, and $9% for the fourth
year. How much would you be willing...

You are valuing an investment that will pay you $24,000
per year for the first 6 years, $28,000 per year for the next 10
years, and $54,000 per year the following 14 years (all payments
are at the end of each year). If the appropriate annual discount
rate is 6.00%, what is the value of the investment to you
today?

A) After a 1 year investment you receive 7% interest (nominal)
from your bank. However, looking at how prices have changed, you
soon realize that the real rate of interest was actually 1.9%. How
much was inflation during that year?
B) You are offered a court settlement in the following terms:
you will receive 7 equal payments of $4,185 each every year, with
the first payment being made 2 years from now. The current annual
interest rate is 5%. Assume...

You are offered a court settlement in the following terms: you
will receive 7 equal payments of $765 each every year, with the
first payment being made 2 years from now. The current annual
interest rate is 3%. Assume yearly compounding. What is this
settlement worth in present value terms? Enter your answer in the
form of dollars, rounded to the nearest cent, and without the
dollar sign ('$').

27) You are valuing an investment that will pay you nothing the
first two years, $18,000 the third year, $20,000 the fourth year,
$24,000 the fifth year, and $30,000 (all payments are at the end of
each year). What is the value of the investment to you now if the
appropriate annual discount rate is 13.00%?
$102,414.54
$40,588.54
$92,000.13
$74,756.75
$52,177.07

You are offered a court settlement in the following terms: you
will receive 5 equal payments of $8,262 each every year, with the
first payment being made 3 years from now. The current annual
interest rate is 5%. Assume yearly compounding. What is this
settlement worth in present value terms?

You are offered an investment that will pay you $1,721 per month
for next 16 years. Assuming you want to earn an 5.04% rate of
return, what is this investment worth today? Round to the nearest
cent.

You've been offered an investment opportunity that will pay
you $10,000 in three years. It is somewhat risky, so you would only
take on this investment if you earned a 20% annual return with
annual compounding. What is the most that you would pay for this
investment today?
· are you trying to find a PV or FV?
· show your calculations using the formula
· show your calculations using the keystrokes for your
financial calculator (state which financial calculator...

You've been offered an investment opportunity that will pay you
$10,000 in three years. It is somewhat risky, so you would only
take on this investment if you earned a 20% annual return with
annual compounding. What is the most that you would pay for this
investment today?
are you trying to find a PV or FV?
show your calculations using the formula
show your calculations using the keystrokes for your financial
calculator (state which financial calculator you are using)...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 27 minutes ago

asked 27 minutes ago

asked 39 minutes ago

asked 39 minutes ago

asked 43 minutes ago

asked 43 minutes ago

asked 46 minutes ago

asked 50 minutes ago

asked 52 minutes ago

asked 53 minutes ago

asked 1 hour ago