Question

1) Money or funds can be thought of as a commodity, like any other commodity that...

1) Money or funds can be thought of as a commodity, like any other commodity that can be bought or sold. T or F

2) The sum of the present value discount factors for 1...n years equals the present value factor for an annuity at year n.

Homework Answers

Answer #1

1) True

Money can be thought as commodity. for example one can hedge his foreign currency exposure using forward contract. One can buy dollar and keep it and sell dollar at high price.

2) True

Prsent value factor for annuity is nothing but sum of present value of discount factor. For example Lets say r = 10%, n = 5 years

PVIFA = (1-(1/(1+r)^n/r)

=(1-(1/1.1)^5 / 0.1)

=(1-0.620921/0.1)

=3.7908

Now statement showing total of PVIF

Year PVIF @ 10%
1 0.9091
2 0.8264
3 0.7513
4 0.6830
5 0.6209
3.7908
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
True or False: The sum of the present value discount factors for 1...n years equals the...
True or False: The sum of the present value discount factors for 1...n years equals the present value factor for an annuity at year n.
Coronado Altidore invested $9,500 at 6% annual interest, and left the money invested without withdrawing any...
Coronado Altidore invested $9,500 at 6% annual interest, and left the money invested without withdrawing any of the interest for 12 years. At the end of the 12 years, Coronado withdrew the accumulated amount of money. Click below to view the factor tables. Table 1. Future Value of 1 Table 2. Future Value of an Annuity of 1 Table 3. Present Value of 1 Table 4. Present Value of an Annuity of 1 (For calculation purposes, use 5 decimal places...
I would like to retire in 2034 and to have a savings account that allows me...
I would like to retire in 2034 and to have a savings account that allows me to withdraw $30,000 per year, at the end of each year, beginning in 2034 and continuing through 2045. I found a fund that earns 4% annual return. To develop the necessary savings for my withdrawals, I intend to make equal deposits at the end of each of the years 2021 through 2033. Two required considerations: FIRST: Identify the details below that I need in...
Required: 1. Calculate the present value for the following assuming that the money can be invested...
Required: 1. Calculate the present value for the following assuming that the money can be invested at 11% percent. (Round final answers to the nearest dollar amount.) Present Value a. You may receive $63,000 immediately. $    b. You may receive $86,000 at the end of five years. $    c. You may receive $20,000 at the end of each year for five years (a total of $100,000). $    Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate...
1 . An employee retiring from a firm after 36 years of service at age 68...
1 . An employee retiring from a firm after 36 years of service at age 68 has earned a pension of $63,000 per year paid in quarterly payments of $15,750. His expected life expectancy is 12 years further at age 80. The pension payments would end when he dies. a. Given a 16% discount rate based on the investment risk of his employer, what is the lump sum value of the pension when he retires? Excerpts from the Present Value...
Green Industries is a manufacturer of environmentally friendly household cleaners. Its business has been booming and...
Green Industries is a manufacturer of environmentally friendly household cleaners. Its business has been booming and it would like to save some money for a possible future expansion of its operating facilities. If Green is able to save $25,000 per year for the next 5 years, how much money would it have if it is able to earn an 4% rate of return compounded annually? The following time value of money factors may be useful: Present Value Factors PV of...
d. Calculate the future sum of ​$1 comma 700​, given that it will be held in...
d. Calculate the future sum of ​$1 comma 700​, given that it will be held in the bank for 22 years and earn 8 percent compounded semiannually. e. What is an annuity​ due? How does this differ from an ordinary​ annuity? f. What is the present value of an ordinary annuity of ​$2 comma 600 per year for 8 years discounted back to the present at 15 ​percent? What would be the present value if it were an annuity​ due?...
Instructions: use the correct Compound interest table to solve -Future value of 1 (future value of...
Instructions: use the correct Compound interest table to solve -Future value of 1 (future value of a single sum) -Present value of 1 (present value of a single sum) -Future value of an ordinary annuity of 1 -Present value of an ordinary annuity of 1 -Present value of an annuity Due of 1 A. If $4,000 is deposited into an investment account yielding 10% every 6 months starting on 1/1/2018, what amount will be available in the investment account in...
ABC Company has gathered the following information related to an investment in new equipment: annual net...
ABC Company has gathered the following information related to an investment in new equipment: annual net cash inflows ....................... $ 38,230 initial investment ............................ $180,000 life of new equipment ......................... 10 years salvage value of new equipment in 10 year ..... $ 20,000 cost of capital ............................... 10% If the new equipment is purchased, the old equipment that is currently in use can be sold for $9,000. Assume an income tax rate of 40%. Calculate the after-tax net present value...
QUESTION 2. Remember that just like projects, bonds, or any other asset, the intrinsic value (fair...
QUESTION 2. Remember that just like projects, bonds, or any other asset, the intrinsic value (fair value of any asset) is just the present value of all of its future cash flows. For stocks, these future cash flows are dividends. Even if a firm does not currently pay any dividends, it is fair to assume that it will in the future. Even if the investor does not plan on holding on to a stock for a very long time, whomever...