Q4. A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 yearsand then we will pay you (or your beneficiaries) $100 at the end of each year forever."A. Calculate the present value of your payments to the bank if the interest rate is 8.25%.B. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is8.25%?C. Is this a good deal?

Q4. A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 yearsand then we will pay you (or your beneficiaries) $100 at the end of each year forever."A. Calculate the present value of your payments to the bank if the interest rate is 8.25%.B. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is8.25%?C. Is this a good deal?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8EB: You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how...

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You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?
Refer to the present value table information on the previous page. What amount should Brett have in his bank account today, before withdrawal, if he needs 2,000 each year for 4 years, with the first withdrawal to be made today and each subsequent withdrawal at 1-year intervals? (Brett is to have exactly a zero balance in his bank account after the fourth withdrawal.) a. 2,000 + (2,000 0.926) + (2,000 0. 857) + (2,000 0.794) b. 2,0000.7354 c. (2,000 0.926) + (2,000 0.857) + (2,000 0.794) + (2,000 0.735) d. 2,0000.9264
May I ask for an explanation and solution to the question for a better understanding. Thank you! 9. You expect to receive P1,000 at the end of each of the next 3 years. You will deposit these payments into an account which pays 10%, compounded semiannually. What is the future value of these payments, that is, the value at the end of the third year? a. P665.50 b. P7,986.00 c. P3,318.01 d. P3,993.00
A local bank advertises the following deal: Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever. Calculate the present value of your payments to the bank if the interest rate is 8.25%. Annuity Formula: *Note: Equal amounts w/a finite period; $100, 10 years PV = C x (1 - 1 / (1 + r)t / r r = 8.25% C = 100.00 T = 10 100 x (1 - 1 / (1 + .825)10 / .825 100 x (1 - .002439 / .825 100 x (1 - .002439 / .825 100 x .997561 / .825 100 x 1.209164 PV = 120.92 What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is 8.25%. Perpetuity Formula: *Note: Equal amounts w/ an infinite period; $100 PV = C / r r = 8.25% C = 100.00 PV = 100 / 8.25 PV = 121.21 Is this a good deal? I would go with option A over option B. I’m investing less with option A at $120.92.
May I ask for an explanation and solution to the question for a better understanding. Thank you! 15. You expect to receive P1,000 at the END of each of the next 3 years. You will deposit these payments into an account which pays 10 percent, compounded semiannually. What is the future value of these payments, that is, the value at the end of the third year? a. P1,331.00 b. P1,340.10 c. P3,318.01 d. P1,157.63
23. A bank advertises the following deal: "Pay us $100 a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever." Is this a good deal if the interest rate available on other deposits is 8%?
A local bank advertises the following deal: “Pay us $100 a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever.” Is this a good deal if the interest rate available on other deposits is 8 percent? 2. Consider an APR of 12% with monthly compounding. What is the EAR (effective annual rate)?
If you deposit OMR 20930 in your account in a bank. Suppose the bank pays 8% compound interest half yearly. Calculate future value of your money in 5 years. Select one: a. 25464.48 b. 45185.78 c. 30752.45 d. 30981.42 e. All the given choices are not correct
just say it option. Question 1) You took 100.000 TL car loan from a bank. You will repay the loan to the bank in 4 years with a compound interest of 12% per month in 48 equal installments. In this case, how much of the first installment payment is interest and how much is the principal payment? Please choose one: А. 1630, 1000 В. 1000, 1630 С. 1430, 1200 D. 1200, 1430 Question2) If payments are made every 6 months, calculate the interest for the following situations? 9% annual compounded quarterly interest Quarter 3%, quarterly compounded interest 8.8% per annum, quarterly compounded interest Please choose one: А. 9.15%, 3.09%, 9.06% B. 9.55%, 3.09%, 8.8% C. 4.55%, 6.099%, 4.48% D. 9.45%, 6.09, 9.16% E. 9.1%, 12.18%, 8.96