Annuity Questions and Answers

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Annuity Questions and Answers

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Sam and Sue want to provide full funding for their 3-year-old daughter who is expected to start college when she is 18. The current annual cost of a 4-year college degree is $38,000, which is expec...
With $1.5 million in an account expected to earn 8% annually over the retiree's 30 years of life expectancy, what annual annuity can be withdrawn, beginning today?
Mary Alice just won the lottery, and is trying to decide between either receiving 25 annual cash payments of $250,000 with the first payment today, or receiving a cash payment today. Mary Alice dem...
What is the Present Value (PV) of a project with the following cash flows? Assume an interest rate of 8%. || Year || Cash Flow | 1 | $1,000 | 2 | $2,000 | 3 | $3,000 | 4 | $4,000
The lottery gives you a 1 in 14 million chance of winning the jackpot. It promises $20 million to the lucky winner. A ticket costs $1. Alas, the lottery to mention that winnings are paid over 20 ye...
You will make $200 deposits every week into a retirement account for the next 20 years until you retire. If the account offers 0.15% per week, how much will you have in 20 years?
You have just made your first $4,200 contribution to your retirement account. Assume you earn a 13% rate of return and make no additional contributions. What will your account be worth when you ret...
Phillips Industries runs a small manufacturing operation. For this fiscal year, it expects real net cash flows of $190,000. Phillips is an ongoing operation, but it expects competitive pressures to...
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software...
What is the future value of an annuity of $150 per year (first cash flow occurs one year from today) for 43 years if the interest rate is 11% p.a.?
Sunland Telecommunications Corp. has made an investment in another company that will guarantee it a cash flow of $21,000 each year for the next five years. If the company uses a discount rate of 12...
Dan Hercher bought a home in Homewood, Illinois, for $230,000. He put down 20% and obtained a mortgage for 25 years at 8%. What is the total interest cost of the loan?
The Wilson family buys a $325,000 home by putting a 20 % down payment and financing the balance with a 30 year fixed mortgage at 4.35 %. What is the amount of their monthly loan payment to a...
What is the monthly payment for a 25-year mortgage on a home with a $104,000 selling price, a $24,000 down payment, and an 8.5% interest rate?
Joseph will start school on 9/1/14. He is expected to attend school for four years and will need to pay tuition of $50,000 on September 1st of each year. His uncle wants to make an investment on 9/...
The present value of $1 million to be received ten years from now is lower if computed at a discount rate of 10% rather than 14%. True or false?
Cale wants to have $4,000 in 4 years. If he can earn 3.4% on his investments, how much must he invest today to reach his goal?
You plan to retire with $800,000 in 20 years. How much should you deposit each month into an account that pays an 8.5% annual rate compounded monthly?
Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for $22,590.90 that will pay them $3,500 per...
If a single future amount of $800 is to be received in 3 years and discounted at 6%, its present value is a) $754.72 b) $693.36 c) $752.00 d) $671.70
The Ajax Co. just decided to save $1,500 a month for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 3.25 percent...
You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk...
John wants to make a deposit on January 1, 2016, to be able to withdraw $1,200 at the beginning of each year starting January 1, 2020, for four years. The interest rate is 6 percent. What is the am...
Mike deposits $1500 at the end of every month into an account that earns 12.5% interest per year compounded monthly. After two years, he stops making monthly contributions because the interest rate...
Carla Lopez deposits $10,460 per year into her retirement account. If these funds have an average earning of 4% over the 15 years until her retirement, what will be the value of her retirement acco...
A small business owner contributes $1,200 at the end of each quarter to a retirement account that earns 7% compounded quarterly. Suppose when the account reaches $150,000, the business owner increa...
A small business owner contributes $1,200 at the end of each quarter to a retirement account that earns 7% compounded quarterly. How long will it be until the account is worth $150,000?
You are looking into an investment that will pay you $12,000 per year for the next 10 years. If you require a 15% return, what is the most you would pay for this investment?
How much do you need to invest today at an interest rate of 7% in order to have your investment grow to $6,000 in 5 years?
Mike wins the lottery. He is faced with decision to take an immediate payment of 2,000,000 (after taxes) or 175,000 right now and another 19 annual payments of the same amount (20 payments in total...
You are planning for retirement. You have $800,000 in your retirement account. What monthly withdrawal can you make from the fund for the next 30 years at a nominal interest rate of 6%, compounded...
A financial company that advertises on television will pay you $56,000 now for annual payments of $9,500 that you are expected to receive for a legal settlement over the next 9 years. Assume you es...
You plan to retire 33 years from now. You expect that you will live 27 years after retiring. You want to have enough money upon reaching retirement age to withdraw $50,000 from the account at the b...
Sun Publications reported that in 11 years, it would cost approximately $80,000 for four years at a public university and $240,000 for a private university. Bank A quoted 6% interest compounded ann...
Sun Publications reported that in 11 years, it would cost approximately $80,000 for four years at a public university and $240,000 for a private university. Bank A quoted 6% interest compounded ann...
Sun Publications reported that in 11 years, it would cost approximately $80,000 for four years at a public university and $240,000 to send your child to a private university. Bank A quoted 6% inter...
Rebecca calculated that she needs a total of $1,400,000 at retirement (beyond pensions and Social Security). Rebecca is 34 years old, investing aggressively, and expecting to earn 7% in her retirem...
You just won the lottery! Would you rather be given $2,500,00 right now or $500,000 per year for 6 years, assuming an 8% discount rate? Assume you are paid the installments at the end of the year.
What is the term for a cash flow stream that is created by an investment or loan that requires its cash flows to take place on the last day of each quarter and requires that it last for 10 years? a...
What is the term for a cash flow stream that is created by a lease that requires the payment to be paid on the first of each month and a lease period of three years? a. annuity due b. perpetuity c....
Chris invests $X at the beginning of each year for 8 years. The original payments earn an annual effective interest rate of 5%, but the interest received on the original payments is reinvested at a...
Ken will receive a $5,000 annual payment from a family trust. This will continue until Ken in 30; he is now 20. Inflation averages 4% and Ken's real MARR is 8%. If the first payment is a year from...
A contract that calls for regular payments to an individual for life or for a fixed period of time is called a _______. (a) level premium agreement (b) annuity (c) mutual fund (d) fixed dividend pl...
Brenda Young desires to have $32,050 saved after 7 years from now for her kid's college fund. If she will earn 8 percent (compounded annually) on her money, what amount should she deposit now?
Your client has been given a trust fund valued at $1.25 million. He cannot access the money until he turns 65 years old, which is in 25 years. At that time, he can withdraw $24,000 per month. If th...
Ken will receive a $5,000 annual payment from a family trust. This will continue until Ken is 30; he is now 20. Inflation averages 4% and Ken's real MARR is 8%. If the first payment is a year from...
Larry Smart has $10,000 that he can invest today. In addition to this amount, he can also invest $2,500 per year for 30 years (beginning one year from now), at which time he will retire. He plans o...
You just won the lottery! You wish to put away enough money so that you can withdraw $8,500 per month for 20 years. You can earn a 9.9% rate on any funds you deposit. How much will you have to depo...
Your parents are giving you $270 a month for 6 years while you are in college. At an 8 percent discount rate, what are these payments worth to you when you first start college? A. $15,115.32 B. $15...
What is the present value of 100 shares of stock that will pay an annual dividend of $5 per share and will be sold in 8 years for $80 per share? Assume that the investor receives the last dividend...
You have just purchased a home by borrowing $385,000 for 30 years at a fixed APR of 3.85%. The loan payments are monthly and interest is compounded monthly. What is the periodic (monthly) interest...
Mariah is saving for a new outboard motor. How much must she set aside now to have $10,000 four years from now if money compounds at 12% annually?
You want to retire in 20 years. When you retire you expect to live for another 30 years. During those 30 years, you want to be able to withdraw $45,000 at the beginning of each year for living expe...
Hank is going to save for additional money for his retirement fund. Starting 15 years from today, he wants to make the first annual withdrawal from the fund. The annual withdrawals will be $12,000...
A couple with a 7-year-old daughter wants to save for their child's college expenses in advance. Assuming that the child enters college at the age 18 (the couple has 11 year to collect the money)....
Your computer application company has won a court settlement for a patent infringement, you have a choice of taking $50,000 now or $1,100 paid monthly over a 5-year period. The current rate of retu...
You are considering purchasing a $15,000 car. The bank agrees to finance the full purchase price with a 4-year loan at 6% (APR). It is an amortizing loan that compounds interest on a quarterly basi...
Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $170 for this service. Over a period of 13 years, how much does Elaine gain from preparing her own tax r...
You have won a contest and will receive $2,500 a year in real terms for the next 3 years. Each payment will be received at the end of the period with the first payment occurring one year from today...
Your grandparents deposit $2,000 each year on your birthday, starting the day you are born, in an account that pays 7% interest compounded annually. How much will you have in the account on your 21...
Calculate the present value of $4,000 to be received in 12 years if the interest rate is 6.4% compounded annually.
Calculate the present value of $2,500 to be received in 12 years if the interest rate is 6.4% compounded annually.
Calculate the present value of $4,000 to be received in 8 years if the interest rate is 6.4% compounded annually.
What is the present value of a 4-year ordinary annuity of $2,400 per year plus an additional $3,200 at the end of year 4 if the interest rate is 5%?
Michelle sets aside $60 for savings every month. Her bank pays her 4% annually on her savings account. What will Michelle's balance be in 10 years?
If the required rate of return increases, what is the impact on the present value of an annuity?
You wish to buy a $9,000 dining room set. The furniture store offers you a 3-year loan with a 10 percent APR. What are the monthly payments?
What is the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of year 4 if the interest rate is 6%?
What is the present value of a 4-year ordinary annuity of $2,500 per year plus an additional $3,500 at the end of year 4 if the interest rate is 5%?
What is the present value of a 4-year ordinary annuity of $2,000 per year plus an additional $3,000 at the end of year 4 if the interest rate is 5%?
Charlie wants to retire in 15 years, and he wants to have an annuity of $50,000 a year for 20 years after retirement. Charlie wants to receive the first annuity payment the day he retires. Using an...
You bought a racehorse that has had a winning streak for six years, bringing in $250,000 at the end of each year before dying of a heart attack. If you paid $1,155,720 for the horse 4 years ago, wh...
You plan to retire at age 65. You anticipate needing $5,000 per month ($60,000 per year) after you retire. You expect to live for 20 years after you retire. You will work for 40 years, from age 25...
Find the final amount in the following retirement account, in which the rate of return on the account and the regular contribution change over time. $480 per month invested at 5%, compounded month...
A project is expected to produce cash flows of $48,000, $39,000, and $15,000 over the next three years, respectively. After three years, the project will be worthless. What is the present value of...
Use the formula for the present value of an ordinary annuity or the amortization formula to solve the following problem. PV = \$9000, PMT = \$500, n=35 Solve for i. i= \boxed{\space}
Bob invested $2,000 in an investment fund on his 21st birthday. The fund pays 7 percent interest compounded semiannually. Bob is celebrating his 50th birthday today. Bob decides he wants to retire...
On January 1, 2011, Shannon Company completed the following transactions (assume a 10 percent annual interest rate): a. Bought a delivery truck and agreed to pay $50,000 at the end of three years....
At age 20 you invest $1,000 that earns 7 percent each year. At age, 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?
A proposed change to highway design standards is expected to reduce the number of vehicle crashes by 9,200 per year, but will have an initial cost of $150,000,000 and annual costs of $25,000,000. G...
Consider the three mutually exclusive alternatives below. If the MARR is 2% per year, which alternative (if any) should be chosen? Clearly state your assumptions. Alternative X Y Z Capital Invest...
A couple has decided to start a college educational trust fund for their new born child. Suppose a couple made a deposited an initial $1,000 into the account on the child's actual day of birth and...
Carl is the beneficiary of a $21,000 trust fund set up for him by his grandparents. Under the terms of the trust, he is to receive equal installments from this fund at the end of each year over an...
Consider a series of end-of-period CFs spanning 2043-2058, which decrease at a 0.3% rate each period. The amount of the first CF in the series is $123. The nominal interest rate is 3%; compounding...
John Adams is the CEO of a nursing home in San Jose. He is now 50 years old and plans to retire in ten years. He expects to live for 25 years after he retires, that is until he is 85. He wants a fi...
Approximately, how many years will Jorge be able to withdraw $255,000 each year before he runs out of money if his investment account is earning 10% compounded annually? Jorge has just received a $...
Cary's parents established a college savings plan for him when he was born. They deposited $50 into the account on the last day of each month. The account has earned 10% compounded monthly, tax-fre...
Fred Hugh, a recent MBA graduate with an engineering degree, has two job offers, one from Asia and another one from Europe. The European company, in addition to regular monthly salary, will pay a $...
What is the amount of six equal annual deposits that can provide ten annual withdrawals, where a first withdrawal of $21443 is made at the end of year seven and subsequent withdrawals increase at $...
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $129,639. It will have a useful life of 4 years and no salvage value. Annual cash inflows w...
You have just started a new job and one of the fringe benefits is a company contribution of $5,000 every year into a retirement savings account. Assuming the contribution amounts remain unchanged a...
An investment offers $3,600 per year for 15 years, with the first payment occurring one year from now. If the required return is 12 percent, what is the value of the investment? What would the valu...
An investment offers $6,500 per year for 20 years, with the first payment occurring one year from now. a) If the required return is 7 percent, what is the value of the investment? b) What would the...
Kanu has a $515,000 inside a deferred variable annuity. He put $500,000 into the annuity and the remaining $15,000 is growth. He started the annuity exactly one year and one day ago. The sub accoun...
The proceeds of a variable annuity are dependent on the ________. (a) cost of living (b) consumer price index (c) investment return (d) tax rate (e) actual investment.
A woman, with her employer's matching program, contributes $500 at the end of each month to her retirement account, which earns 6% interest, compounded monthly. When she retires after 41 years, she...
JG Wentworth is a private firm that purchases annuities and other long-term payouts from individuals. Their slogan is "it's your money use it when you need it." Suppose an individual has a structur...
Gilberto opened a savings account for his daughter and deposited $1,000 on the day she was born. Each year on her birthday, he deposited another $1,000. If the account pays 8% interest, compounded...
Ramesh Abdul wishes to choose the better of two equally costly cash flow streams: annuity X and annuity Y. X is an annuity due with a cash inflow of $9,000 for each of 6 years. Y is an ordinary ann...
If Kelly can make monthly payments of $725 for 20 years, how much money could she borrow at 6.9% compounded annually?
Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues of...
A company has set aside $10 million to promote a new product. The money is to be spent continuously over a 3 year period(during which it is assumed that the sales will offset expenses). If the $10...
An ordinary annuity assumes equal payments at the end of each period over the life of the annuity. An annuity due is the same thing except the payments occur at the beginning of each period instead...
Ned, a calendar year taxpayer, bought an annuity contract for $3,000, which pays him $50 per month for the rest of his life. The annuity starts on 6-1-14. How much of this annuity is included in hi...
You are considering buying a car from a local auto dealer. The dealer offers you one of two payment options: 1. You can pay $30,000 cash. 2. The "deferred payment plan": You can pay the dealer $5...
The Jones want to save $72,000.00 in 5 years for a down payment on a house. If they make monthly deposits in an account paying 5% compounded monthly, what is the size of the payments that are requi...
Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years. The projected cash flows that result from the contract are given be...
Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years. The projected cash flows that result from the contract are given be...
Jia has just won a R20 million lottery, which will pay her R1 million at the end of each year for 20 years. An investor has offered her R10 million for this annuity. She estimates that she can earn...
Gilberto opened a savings account for his daughter and deposited $800 on the day she was born. Each year on her birthday, he deposited another $800. If the account pays 8.5% interest, compounded an...
In order to accumulate enough money for a down payment on a house, a couple deposits $700 per month into an account paying 6% compounded monthly. If payments are made at the end of each period, how...
In order to accumulate enough money for a down payment on a house, a couple deposits $700 per month into an account paying 6% compounded monthly. If payments are made at the end of each period, how...
In order to access farmland on which you would place wind turbines you can purchase a perpetual easement for $100 per acre per year or you purchase a 50 year easement at a price of $110 per acre pe...
You are planning for your retirement and have decided the following: you will retire in 35 years and will make monthly deposits into your retirement account of $400 for the next 15 years and then m...
Annie begins placing $60 per month into an annuity savings plan when she begins receiving her first official paycheck in July 2018. The savings plan earns 2.5% APR, compounded daily. Calculate the...
You have a loan outstanding. It requires making three annual payments of $2,000 each at the end of the next three years. Your bank has offered to restructure the loan so that instead of making the...
With Return on Investment (ROI) of 10%, there exist three equal-service machines with the costs shown in the table. Revenues for all three alternatives are expected to be the same. Which machine wi...
Biz Wiz, Inc. must purchase a laser cutter to make turbine blades they just designed. They can purchase a high-power cutter that would allow them to cut thicker blades in the possible future or the...
A series of equal payments of $1,600 for 25 years is equivalent to what present amount at an interest rate of 8% compounding quarterly?
Siegfried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an annuity that will make a level payment at the end of each year until his death. If...
An investor needs $20,000 in 11 years. (a) What amount should be deposited in a fund at the end of each quarter at 6% compounded quarterly so that there will be enough money in the fund? (b) Find...
What equal series of payments must be paid into a sinking fund to accumulate $12,000 in 5 years at 9.25% compounded monthly when payments are monthly?
Sammy's parents started saving for college when he was 10 years old. They contributed $300 every month and earned 10% annually (compounded monthly). How much will Sammy has when he starts cortege a...
You win the $20 million state lottery, and you have a choice of taking an amount of money per year for the next 20 years or a flat payment now. The flat payment that the state offers you is $9.82 m...
Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.6 million. The equipment will be depreciated straight line over 6 years to a value...
What will the annual payments be for an ordinary annuity for 10 years with a present value of $1,200 if the interest rate is 8%?
Find the future value of an ordinary annuity that pays $1,000 each of the next 5 years if the interest rate is 10%.
You have $126,000 in your retirement account that is earning 5% per year. How many dollars in withdrawals per year would reduce this nest egg to zero in 20 years?
What is the principal remaining after 20 monthly payments have been made on a $20,000 five-year loan? The annual interest rate is 12% nominal compounded monthly.
Find the present value of an ordinary annuity that pays $1,000 each of the next 5 years if the interest rate is 10%.
Find the present value of $1,000 due in 6 years if the discount rate is 10%.
A Virginia-based entrepreneur believes that joining Kinloch Golf Club will allow for profitable networking opportunities, thus improving her business
ABC company is considering the introduction of a new product line. The initial investment required for this project is $200,000, and annual maintenance costs are anticipated to be $35,000. Annual o...
U. S. Engineering is investigating the possibility of acquiring new automated packaging equipment at a cost of $12,000. It is expected that the equipment will have a salvage value of $1,000 at the...
Stan wants to plan for his retirement in 10 years. During his 30 year retirement, he plans to spend $5,000 monthly, while earning 10% his retirement funds. He will save monthly in his 401K retireme...
Explain the difference between a with-profit annuity and a unit-linked annuity.
You can purchase an optical scanner today for $400. The scanner provides benefits worth $60 a year. The expected life of the scanner is 10 years. Scanners are expected to decrease in price by 20 pe...
Let's assume you want to retire with $1,000,000 in your investment portfolio. Given that your investment timeline is 35 years, the return on investment is going to average 8% and you plan to contri...
You borrow $5,000 from your parents to purchase a used car. The arrangements of the loan are such that you make payments of $250 per month toward the balance, plus 1% interest on the unpaid balance...
A car may be purchased with a $3500 down payment now and 72 monthly payments of $480. If the interest rate is 9 percent compounded monthly, what is the price of the car?
In 2000, Alan purchased a commercial single premium annuity. Under the terms of the policy, Alan is to receive $120,000 annually for life. If Alan predeceases his wife, Katelyn, she is to receive $...
Starting on September 1, 2000 - the day he starts college - and ending on September 1, 2004, Craig borrowed $4000 a year to pay for college expenses (that's 5 withdrawals total). After graduation,...
A 99% confidence interval for the population mean is (2, 14). Which of the following statements is correct? \\ a) 1% of the time the sample mean will be outside the interval. b) The 95% confidenc...
Jane Q. Employee has just started her new job with Big Conglomerate, Inc., and is already looking forward to retirement. BCI offers her as an annuity account that is guaranteed to earn 6% annual in...
You have $20,000 that you put on deposit on your 30th birthday at an interest rate of 5% compounded annually. On your 40th birthday, the account begins earning 6% interest. On your 50th birthday, i...
What is the present value of an annuity that will make a fixed payment $30 each year for three years? Assume that the interest rate is 2%.
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its Richmond home office. The system receives current market prices and other information from several online...
A security pays $100 in one year and $100 in two years. The one-year discount rate is 4%, the two- year is 4.92%. What is the percentage price change of the security if: A) the one-year discount ra...
Foot Loose, Inc., needs to purchase a new shoelace-making machine. Machines Ready has agreed to sell Foot Loose the machine for $22,000 down and four payments of $5,700 to be paid in semiannual ins...
Determine the annual interest rate that is needed for the following annuities to accumulate to $25,000. Assume payments are made at the end of each period. 1. Annual payments of $4,095 for five ye...
Determine the amount of the periodic payments needed to pay off the following purchases. Payments are made at the end of the period. 1. Purchase of a waterbed for $1,205.Monthly payments are to be...
XYZ Company has obtained a bank loan to finance the purchase of an automobile for one of its executives. The terms of the loan require monthly payments at the end of each month of $585. If the inte...
Maintenance money for an athletic complex has been sought. Mr. Kendall, Athletic Director, would like to solicit a donation to cover all future expected maintenance costs for the building. These ma...
An annuity pays $142.38 each period for 6 periods. For these cash flows, the appropriate discount rate per period is 4.5%. What is the present value of this annuity?
An annuity pays $173.00 each period for 13 periods, and the present value is $513.94. What is the discount rate per period of this annuity?
An annuity pays $40.00 each period. The appropriate discount rate per period is 6.0%, and the present value of the annuity is $168.49. What is the number of periods?
An annuity makes a payment each period for 10 periods. The appropriate discount rate per period is 7.0%, and the present value of the annuity is $142.38. What is the amount of the payments?
An annuity pays $53.00 each period for 4 periods. For these cash flows, the appropriate discount rate per period is 7.0%. What is the present value of this annuity?
You have just purchased an annuity that pays $100 per year in perpetuity. You paid $3,000 for this annuity.
Jenny Franklin estimates that as a result of completing her master's degree, she will earn $7,000 a year more for the next 40 years. A.) What would be the total amount of these additional earnings...
Find the present and future values of an income stream of $6,000 per year for 17 years, assuming a 2% interest rate compounded continuously.
Mr. V. Pootin has been hired to manage pension fund assets for Hack Corporation, a large information technology firm. Hack currently has $20 million assets in the fund and expects to have cash infl...
Compute the monthly payment required to amortize a 250,000 mortgage at: A. 7% for 30 years B. 6.5% for 20 years C. 6 5/8% for 15 years
Problem 6-52 Calculating Present Values (LO1) A 6-year annuity of twelve $10,200 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount...
A self-employed person deposits $3,000 annually in a retirement account (called a Keogh or H.R. 10 plan) that earns 8%. How much will be in the account when the individual retires at the age of 65...
A self-employed person deposits $3,000 annually in a retirement account (called a Keogh or H.R.10 plan) that earns 8 percent. How much additional money will be in the account if the saver defers re...
An investor wishes to accumulate $115,000 in a fund at the end of 18 years. To accomplish this, the investor plans to make constant deposits at the end of each year, the final payment made one year...
Aurian rents trucks for his hauling service and pays $17 per hour for a truck. He rents the trucks on an as-needed basis about twice per week. His daily cost of capital is 0.05% and he rents a truc...
A university is offering a charitable gift program. A former student who is now 50 years old is consider the following offer: The student can invest $10,000.00 today and then will be paid a 9.00% A...
You want to have $6,000,000 in an account exactly 16 years from today. They will make equal quarterly payments of $20,000 beginning next quarter and ending in 16 years. The account earns 8.00% p.a....
You work for a pharmaceutical company that has developed a new drug the patent on the drug will last 17 years. You expect that the drug's profits will be $4 million in its first year and that this...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $2 million in its first year and that this...
Jessie won big in a recent raffle. Her prize entitles her to a 20-year annuity with equal annual payments beginning immediately and totaling $10,000,000. Jessie has agreed to strike a deal with Lib...
Svetlana won $1,000,000 in a contest to be paid in twenty $50,000 payments at yearly intervals, the first payment paid at the time of the contest. Svetlana decided to keep X each year to spend and...
A design-build-operate engineering company in Texas that owns a sizable amount of land plans to lease the drilling rights (oil and gas only) to a mining and exploration company. The contract calls...
Your division is considering the purchase of a Cramit packaging machine for $200,000. You project that the operating and maintenance costs (O&M) will be $50,000 this year and that they will increas...
An investment offers $5,091 per year for 21 years, with the first payment occurring one year from now. If the required return is 9.2%, what is the present value of the investment?
Fargo North is considering the purchase of some new equipment costing $75,000. This equipment has a 2-year life after which time it will be worthless. The firm uses straight-line depreciation and b...
A movie is expected to produce cash flows of 16,400 dollars per month with the first monthly cash flow expected later today and the last monthly cash flow expected in 6 months from today. The cost...
Jia received $12,000 from a lottery. She uses this money to purchase two different annuities, each costing $6,000. The first annuity is a 24-year annuity-immediate paying $K per year, and the secon...
The number of years from now that an initial investment of $1,000,000 would be recovered from uniform receipts of $131,000 per year beginning three years from now at an interest rate of 10% per yea...
The manager of a canned food processing plant is trying to decide between two different labeling machines. Machine A will have a first cost of $42,000, an annual operating cost of $28,000, and a se...
Consider a second alternative for accumulating funds to buy the new billing system. In lieu of a lump sum investment, assume that five annual payments of $32,000 are made at the end of each year. W...
Marie is putting together a retirement plan and is scheduled to retire in 40 years. She is planning to open a retirement account and invest an equal amount each month into the retirement account. I...
You have decided to place $606 in equal deposits every month at the beginning of the month into a savings account earning 10.54 percent per year, compounded monthly for the next 3 years. The first...
Parker has nothing saved for retirement. Parker wants to receive $1,570 dollars per year for 7 years during retirement. The first of these payments will be received in 5 years. Parker can earn a re...
You estimate that by the time you retire, you will have accumulated $1.8 million in savings. If the interest rate is 4% and you live 30 years after retirement, what annual level of expenditure will...
You borrow $200,000 to buy a house. The mortgage rate is 7.5% and the loan period is 30 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total in...
The Gentle Warming Company is purchasing a new cooling system. To pay for the system, the company agrees to make 12 installment payments of $6,573 per year, beginning at the end of year 1. The comp...
You are considering buying a new car. The dealer is offering $1,000 cashback or 2.4% APR on a 5-year loan. The price of the car is $10,000. Your bank is offering a 6.0% APR on 5-year car loans. Whi...
Assume that the working career of most engineers is 40 years. How much would an engineer need to save each year to have saved $2,000,000 by retirement if interest is 10% compounded annually?
A college professor retires with $1,500,000. How much can he withdraw yearly for the next 30 years if the money is invested in a stock portfolio that is paying 12% per year?
Each year a company is required to place money into a bank account to retire its bond's principal at maturity. If the bond's principal is $10 million, and bank interest is estimated at 8%, how much...
It is January 1, 2016. Starting today, you plan to invest $5,000 at the beginning of every quarter for fifteen years into a pension fund that will deliver an effective annual return of 7.5% net of...
You purchased a house for $150,000.00. The mortgage is for 30 years with equal monthly payment at a monthly interest rate of 3/4 percentage. What is the monthly mortgage payment?
You have just purchased and have obtained a 30-year, $300,000 mortgage with an interest rate of 12 percent. What is your annual payment?
You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30 year mortgage with monthly payments and an initial balance of $700,000. The mortgage is currently exactly 18...
A small manufacturing company needs to invest in new equipment. It determines that it can afford to pay back 5,000 in one year. After that it can pay back 5, 100 and so on. Each year the size of th...
Susan will start attending college in September 2022 at which time she will need $8,000 for the first year of study. Her costs at college for the next three years are estimated at $9,000, $10,000,...
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $400. The loan would have a 12 percent APR based on end-of-month payments. What is the most expe...
You deposit $10,000 at the end of each of the next four years into an account that pays 12 percent annually. What is the account balance at the end of 10 years?
You borrowed $54,000 from a loan shark. He charges an annual interest rate of 21.9 percent but requires you to make weekly payments and pay the loan off in full within one year. given these terms,...
Please work out and explain the following question: Parents deposit $5,000 into a savings account at the end of each year for 22 years to help their child pay for college. The savings account pays...
If a hospital received $7,500 in payments per year at the end of each year for the next twelve years from an uninsured patient who underwent an expensive operation, what would be the current value...
Juan wants to have $45,000 available to make a down payment on a house at the end of 4 years. His account earns 6% compounded semi-annually (2 times per year). How much does Juan need to invest eve...
Determine the EAC (Equivalent Annual Cost) for the furnace over one year, two years, three years, and four years of service life. A new heat treatment furnace to be used by an aluminum fabrication...
The company you work for is trying to decide between two projects. Project 1 costs dollar 150,000 upfront and has an expected life of 4 years, over which it will return dollar 47,000 each of the fo...
Annual payments of 500 are paid into an account annually in arrear. The account earns a fixed interest of 3% per annum. What is the present value of the series of payments made over 5 years? How mu...
Smith Company has purchased a new office building. The company has agreed to pay the developer $55,000 annually for 9 years. Using present value techniques, determine the value that should be recor...
Sara, who has just turned 36, would like to have an annual annuity of $21,500 paid over a 20 year period, the first payment occurring on his 66th birthday. How much must Sara save each year (end of...
What is the amount of six equal annual deposits that can provide ten annual withdrawals, where the first withdrawal of $21,443 is made at the end of year seven and subsequent withdrawals increase a...
A company borrowed $46,000 cash from the bank and signed a 4-year note at 5%. The present value of an annuity for 4 years at 5% is 3.5460. The annual annuity payments equal _________.
At the birth of her daughter, Maria commits to pay for her college education. She decides to make deposits of $500 at the beginning of each quarter into an account for 16 years. Find the value of t...
The condominium at the beach that you want to buy costs $249,500. You plan to make a cash down payment of 20 percent and finance the balance over 10 years at 6.75 percent. What will be the amount o...
You want to purchase a new condominium that costs $287,500. Your plan is to pay 25 percent down in cash and finance the balance over 15 years at 3.75 percent. What will be your monthly mortgage pay...
Clarence Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 8% basis that will enable him to withdraw $20,000 per year on June 30, b...
Connor Company is considering purchasing new equipment for $180,000. The expected life of the equipment is 6 years with no residual value. The equipment is expected to generate revenues of $185,000...
Stephen Bosworth, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on a 9% basis that will enable him to withdraw $33,000 per year on June 30, beginni...
Bard Corporation leases a $75,000 machine. It is required to make 15 equal annual payments at year-end. The interest rate on the lease is 16 percent. What is the periodic payment?
Erie General Hospital wants to purchase a new blood analyzing device today. Its local bank is willing to lend it the money to buy the analyzer at a 2 percent monthly rate. The loan payments will st...
A fleet manager must choose between two trucks to purchase for a company's fleet. The company uses an interest rate of 10% and will keep either truck for 5 years. Truck A costs $29,000 and has a ma...
Use the following to answer questions 15-18. You currently live (rent free) in your parents' bas... Use the following to answer questions 15-18. You currently live (rent free) in your parents' base...
Maria expects to receive a payment of $33,000 in 3 years. At a discount rate of 7%, what is the present value of this payment?
Jason Argo, 35, works for Inter-Mac Transportation Corp. His normal job of loading trucks paid $12.00 per hour. While working, he suffered a back injury and was declared 50 percent disabled. To set...
The price of a new car is $32,000. Assume that an individual makes a down payment of 25% toward the purchase of the car and secures financing for the balance at the rate of 8%/year compounded month...
Mr. Jones has deposited his life savings of $70,000 in a retirement income plan with a local bank. The bank pays 10.75% per year, compounded annually, on such deposits. What is the maximum fixed am...
If a company invest $20,000 to upgrade some equipment and prefers to earn a 15% return on its investments, how much money the upgrade save per year over 5 years in order for the investment to be ac...
If you invest $9,600 per period for the following number of periods, how much would you have: a. In 14 years at 6%? b. In 30 years at 10%?
How would you describe in factor notation the present worth of a series that gives you $84 in periods 3-10, then nothing until period 99 when you receive another $84? a. P=84((1+i)^99-1)/(i(1+i)^9...
Tilman Company is required by a bond indenture to make equal annual payments to a bond sinking fund at the end of each of the next 20 years. The sinking fund will earn 8 percent interest and must a...
A lottery claims its grand prize is $10 million, payable over 20 years at $500,000 per year. If the first payment is made immediately, what is this grand prize really worth? Use an interest rate of...
The effort required to maintain a scanning electron microscope is known to increase by a fixed percentage each year. A high-tech equipment maintenance company has offered its services for a fee of...
The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $805,000 per year for the next five years,...
You have just started a new job and one of the fringe benefits is a company contribution of $5,000 every year into a retirement savings account. Assuming the contribution amounts remain unchanged a...
Fred wants to save enough money each year so that he can purchase a sports car in January 2013. Fred receives a large bonus from his employer every December 31. He anticipates that the car will cos...
What is the present value of $1,500 received for 24 months in arrears, followed by $1,200 received for 36 months in arrears, if the annual discount rate appropriate is 9.25%? a. $62,261 b. $13,984...
A company is considering purchasing a new machine tool. In addition to the initial purchase and installation costs, management is concerned about the machine's maintenance costs, which are expected...
Sarah just won a $3,000,000.00 lottery. According to the lottery, they will pay her a lump sum of $500,000.00 on October 1, 2012 and the balance in equal annual installments for 10 years. Assuming...
How many years will it take to pay off a $2000 debt, with semiannually payments of $100 at the end of every 6 months period, if the interest is 6% compounded semi-annually?
You want to be able to withdraw $30,000 each year for 25 years. Your account earns 10% interest. How much do you need in your account at the beginning?
An annuity will pay $1000 per year for 10 years, starting five years after today. What is the present value (PV) of this annuity today, given that the interest rate is 7%?
At your age (assume 20) you can assume that you will live to be 100. If you graduate at 23 and start to work, you can expect to work for 47 years, until age 70. At that time you will be eligible fo...
EEE Corp. has a new issue of preferred stock it calls 20/20 preferred. The stock will pay $20 dividends but the first dividend will not be paid until 20 years from to day. If you require a return o...
You own a store that is expected to make annual cash flows forever. The cost of capital for the store is 16.83 percent. The next annual cash flow is expected in one year from today and all subseque...
Bill Broadman owns a garage and is contemplating purchasing a tire retreading machine for $16,280. After estimating costs and revenues, Bill projects a net cash flow from the retreading machine of...
You just won the state lottery. The state gives you the choice of $1,000,000 today or a 20-year annuity of $75,000, with the first payment coming one year from today. What rate of return is built i...
An investor has an account balance of 4,500,000 on his 65th birthday. On his 66th birthday, the investor will make her first annual retirement withdrawal, and the final withdrawal will take place o...
On the day your daughter is born, you deposit $5,000 in a savings account for college that earns 6% compounded annually. On each of her birthdays thereafter up to and including her 18th birthday yo...
How much of the first payment will be principal for a $100,000, 4.26%, thirty year mortgage with annual payments? A. $5,966.95 B. $1,706.95 C. $4,260.00 D. $2,315.00
You deposit $11,000 annually into a life insurance fund for the next 11 years, after which time you plan to retire. a. If the deposits are made at the beginning of the year and earn an interest ra...
Use BA II Plus Financial Calculator to solve these questions. An 8-year annuity of 16 $8,700 semiannual payments will begin 10 years from now, with the first payment coming 10.5 years from now. R...
The National Highway Traffic Safety Administration raised the average fuel efficiency standard to 35.5 miles per gallon for cars and light trucks by the year 2016. The rules will cost consumers an...
Sue is age 73 and has a great deal of difficulty living independently as she suffers from severe rheumatoid arthritis. She is covered by a $400,000 life insurance policy, and her children are named...
John D. Investor owns an apartment building. Each apartment has certain items, such as refrigerators, garbage disposals, and carpets, that are expected to require replacement in 15 years. The total...
What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?
Matt Johnson delivers newspapers and is putting away $35 at the end of each quarter from his paper route collections. Matt is 11years old and will use the money when he goes to college in 7 years....
Suppose I will need $ 7000 in 3 years. How much do I need to deposit each week into an account paying 3%annual interest compounded continuously in order to reach my goal?
If Otto Mann agrees to pay $40,000 for an annuity that provides $605 at the beginning of each month for the next 10 years, given an annual interest rate of 6.9%, would you say that he made a good i...
Present values are negatively impacted by higher interest rates. How does compounding compare with discounting? How does the future value of an annuity compare with the future value of a lump sum?
The cash flows given in the table below are for two different alternatives. MARR 10 The equivalent uniform annual worth EUAW of alternative N is . Salvage value never realized A.1,762 B.2,476 C.1,9...
Fairmont Textile has a plant in which employees have been having trouble with carpal tunnel syndrome (CTS, an inflammation of the nerves that pass through the carpal tunnel, a tight space at the ba...
Milt just hit the lottery jackpot. The lottery is offering to pay him $2 million per year for the next 25 years, or single payment of $30 million right now. If Milt expects to earn 8% annual intere...
You need to save over $500,000 over the next 9 years, how much should be deposited monthly if the investments earns 5% interest compounded at the end of each month?
You need to save over $500,000 over the next 9 years, how much should be deposited monthly if the investments earns 5% interest compounded at the beginning of each month?
How much must be placed each month into a retirement account earning 9% compounded monthly if the value of the account is to reach $1,000,000 in 25 years? If the account continues to earn 9% after...
E-loan, an online lending service, recently offered 36-month auto loans at 5.4% compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly pa...
E-loan and online lending service, recently offered 36 month auto loans at 4.8% compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly pa...
E-Loan, an online lending service, recently offered 36 month auto loans at 3.6% to applicants with good credit ratings. If you have a good credit rating and can afford monthly payments of $347, how...
What would be your future account value (after-tax and after-inflation) if you invested $125 each month into a growth mutual fund for 20 years? Assume an average annual rate of return of 12.5 perc...
In this week's Powerball lottery, the lucky winner walked away with a $294 million prize, to be paid in 26 yearly installments of $11.3 million. The first installment will be paid immediately, of c...
Show your complete solution procedure including appropriate cash flow diagrams. Show work done. The Townsville City Council is considering a proposal by the mayor to construct a recreational facili...
Morris Industries would like to purchase some new equipment costing $1.56 million. This purchase is scheduled for 3 years from today. The company earns 3.8% compounded monthly on its savings. How m...
What is the payment for a 30-year mortgage for $180000 with monthly payments and an interest rate of 8%? a) 1,332.41 b) 553.32 c) 120.78 d) 1,320.78 e) 1,200.00
Suppose you get a student loan of $20,000, and your payments are deferred until after you graduate, 2 years from now. Then, you will make 15 yearly payments. What are your payments if the interest...
What would be the monthly mortgage payments for each of the following situations? a. A $138,500, 30-year loan at 6.0 percent. b. A $216,500, 15-year loan at 5.0 percent. c. A $173,000, 15-year loan...
Let's say that social security promises you $39,000 per year starting when you retire 45 years from today (the first $39,000 will come 45 years from now). If your discount rate is 8%, compounded an...
What is the present value of 63 annual payments of $1,075 each with the first payment being received immediately? Assume you can invest money at a 10% stated rate with semi-annual compounding.
What is the present value of 34 annual payments of $3,858 each with the first payment being received immediately? Assume you can invest money at 10% stated rate with sem-annual compounding.
A firm recently purchased a new facility costing $984 thousand. The firm financed this purchase with an amortized loan at an interest rate of 8.8 percent APR, with monthly payments of $23.9 thousan...
Kelsey Inc. owes Gallagher Company $15,000. How much would Jimmy Inc have to pay each year if the debt is retired through four equal payments (made at end of each year)? The prevailing rate of inte...
A small factory heats its office block by diesel air heater and spends $800 per month on diesel for this purpose (assume whole year need the same operation cost per month). Cost increases of diesel...
Suppose Jenna sells the bond, invests the proceeds in the stock fund, and then saves an additional $3000 at the end of each year as she planned. If, indeed, Jenna continues to earn a 9%effective a...
A young man has just been employed by a government agency. He has a good job security and expects consistent 5% annual salary increases. His starting annual salary is $30,000. He plans to save 10%...
If you receive $392 at the end of each year for the first three years and $626 at the end of each year for the next three years. What is the present value? Assume the interest rate is 10%. Round...
Donald had purchased a life insurance policy (premiums totaled $250,000) that paid $600,000 in the event of accidental death. The proceeds were payable to Darlene, who elected to receive installmen...
Use future or present value techniques to solve the following problems. a. Starting with $20,000, how much will you have in 20 years if you can earn 5% on your money? b. If you inherited $100,000...
If you put up $36,000 today in exchange for a 6.5%, 16-year annuity, what will the annual cash flow be?
Benjamin Franklin left $100,000 to the City of Boston with the caveat that they couldn't touch it for 100 years. Then they could take out half and leave the other half for the next hundred years. H...
What does first receipt mean when calculating present and future values?
You are given the following information: ? X is the present value of all payments from an n?year annuity-immediate which pays 1 per year. ? Y is the present value of all payments from an n?year an...
If you invest $500 at the end of each year in a mutual fund earning an average 9% after-tax, what will it grow to in 30 years?
You need to accumulate $10,000. To do so, you plan to make deposits of $1,250 per year with the first payment being made a year from today into a bank account that pays 12% annual interest. Your la...
You need to accumulate $10,000. To do so, you plan to make deposits of $1,250 per year, with the first payment being made a year from today, in a bank account which pays 12 percent annual interest....
With a 5% discount rate, what is the present value of the direct cost of attending culinary school for 4 years? Tuition is $29,380 per year.
If you borrow $2,000 and agree to repay the loan in six equal annual payments at an interest rate of 11%, what will your payment be? What will your payment be if you make the first payment on the l...
Holistic Holidays Limited has an employment contract with Loretta Bloom, its newly hired CEO. The contract requires a lump-sum payment of $1.5 million be paid to Ms. Bloom upon the successful compl...
You have decided to place $651 in equal deposits every month at the beginning of the month into a savings account earning 9.98 percent per year, compounded monthly for the next 15 years. The first...
You'd like to buy a small ranch when you retire in 38 years. You estimate that in 38 years you'll need $9 million to do so. If your savings can earn 1.0% per month, how much will you need to save e...
Peter Lynchpin wants to sell you an investment contract that pays equal $16,500 amounts at the end of each year for the next 20 years. If you require an effective annual return (EAR) of 8% on this...
You have just won the Georgia Lottery with a jackpot of $40,000,000. Your winnings will be paid to you in 26 equal annual installments with the first payment made immediately. If you feel the appro...
You have just won the Georgia Lottery with a jackpot of $11,000,000. Your winnings will be paid to you in 26 equal annual installments with the first payment made immediately. If you had the money...
Yogi Berra Jr. has agreed to play for the New York Mets for $4 million per year for the next 10 years. What table would you use to calculate the value of this contract in today's dollars? a. Presen...
Assume that Liza will begin saving for retirement at age 24 by investing $3000 per year for the next 43 years. Each year Liza will increase her annual deposit by 5%. Therefore, at age 25 she will i...
Nadine Love invests in a $60,000 annuity at 12% compounded annually starting today. The first of 15 receipts from the annuity is payable to Love 10 years after the annuity is purchased and on the d...
A person is planning to open a retirement account and invest an equal amount each year until retirement, which is in 38 years. This account will earn 13% per year and will have $1,750,000 in the ac...
Find the present value of saving AED 10,000 per month at 6 percent for four years.
A 20 year annuity certain provides payments os $200 at time 1 year, $180 at time 2 years, $160 at times 3 years, and so on until the payments have been reduced to $60. Payments then continue at $60...
What is the present value of an investment that promises to pay you $1,000 in five years if you can earn 6 percent interest compounded annually?
What is the future value on December 31, 2014 of seven cash flows of $10,000, with the first cash payment made on December 31, 2007 and interest at 12% being compounded annually?
What is the future value on December 31, 2013 of seven cash flows of $10,000, with the first cash payment being made on December 31, 2007 and interest at 12% being compounded annually?
Assume that you have the opportunity to receive $3,000 at the end of each of the next five years. Given an interest rate of 6%, how much would you be willing to pay for this investment today?
What is the theoretical value of an investment that promises to pay you $75 at the end of every year for seven years, plus $4,000 at the end of the seventh year? Your required rate of return is 6%.
Mr. Jones intends to retire in 20 years at the age of 65. As yet he has not provided for retirement income, and he wants to set up a periodic savings plan to do this. If he makes equal annual payme...
Winners of the Georgia lotto drawing are given the choice of receiving the winning amount divided equally over 21 years or as a lump sum cash option amount. The cash option amount is determined by...
Toronto Shakespearean Theater's board of directors is considering the replacement of the theater's lighting system. The old system requires two people to operate it, but the new system would requir...
Ross has decided that he wants to build enough retirement wealth that, if invested at 5 per cent per year, will provide him with $3,200 of monthly income for 30 years. To date, he has saved nothing...
Ross has decided that he wants to build enough retirement wealth that, if invested at 7% per year, will provide him with $3,000 of monthly income for 30 years. To date, he has saved nothing, but he...
Ross has decided that he wants to build enough retirement wealth that, if invested at 6 percent per year, will provide him with $4,300 of monthly income for 25 years. To date, he has saved nothing,...
Ross has decided that he wants to build enough retirement wealth that, if invested at 6% per year, will provide him with $4,600 of monthly income for 30 years. To date, he has saved nothing, but he...
Ross has decided that he wants to build enough retirement wealth that, if invested at 8% per year, it will provide him with $4,400 of monthly income for 30 years. To date, he has saved nothing, but...
Ross has decided that he wants to build enough retirement wealth that, if invested at 7 percent per year, will provide him with $4,200 of monthly income for 30 years. To date, he has saved nothing,...
Ross has decided that he wants to build enough retirement wealth that if invested at 5 percent per year will provide him with $4,700 of monthly income for 25 years. To date, he has saved nothing, b...
You just got $60,000 from an inheritance and want to withdraw amounts of $2,595.74 each quarter. If the rate is 12%, how long can you do this? 1. Identify the type of problem. 2. Write out the for...
Parker is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $31,000 payment each year for the next 18 years. Calcul...
Parker is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $47,000 payment each year for the next 17 years. Calcu...
Once you graduate college and start working, you expect that you'll be able to save $4 thousand every year at the start of each year, an amount that will grow with inflation. Inflation is anticipat...
Find the present value of the ordinary annuity that has payments of $2400 made annually for 25 years at 6% interest compounded annually.
On January 1, 2014, Boston Company completed the following transactions (use a 8 percent annual interest rate for all transactions) Established a plant addition fund of $440,000 to be available a...
A civil engineering consulting firm needs to purchase $400,000 (constant-value dollar) worth of software 5 years from now. The market interest rate is 10% and the inflation rate is 2.5%. a. How mu...
You have won the Mega Lottery of $225 million and will be awarded the prize in the form of a 30 year annuity or lump-sum payment (The tax implications are identical for either method of award). Whi...
Suppose that you take out a loan for $300,000 to purchase a house. You are required to make monthly payments, and the APR is 6%. How much interest will you end up paying over the life of the loan (...
Suppose that you take out a loan for $300000 to purchase a house. You are required to make monthly payments, and the APR is 6%. How much interest will you end up paying over the life of the loan (3...
Suppose that you take out a loan for $130,000 to purchase a house. You are required to make monthly payments, and the APR is 6%. How much interest will you end up paying over the life of the loan (...
You have been offered 2 different salary arrangements. You can have $7,000 per month for the next 2 years, or you can have $4,800 per month for the next two years, along with a $20,000 signing bonu...
Strauss Corporation is making a $91,950 investment in equipment with a 5-year life. The company uses the straight-line method of depreciation and has a tax rate of 40 percent. The company's require...
Concrete Specialities of Texas, has just leased you a $28,000 concrete mixer. The lease requires six beginning of the year payments that will fully amortize the cost of the car. What is the amount...
You want to have $75,000 in 10 years and can get a 7% rate of return on your investments. How much will you have to save each year to reach this goal?
Your goal is to have $1,500,000, 30 years from now. If you already have $50,000 invested and can earn 10% per year, then how much more do you need to save per month in order to reach your goal? A)...
It is desired to accumulate a fund of $X at the end of 10 years by depositing money at the end of each year such that $t at time t. The deposits earn interest 8% effective but the interest can be r...
It is desired to accumulate a fund of $1,000 at the end of 8 years by equal deposits at the beginning of each year. If the deposits earn interest at 8% effective but the interest can be reinvested...
Mary, age 67 and Bob, age 65, paid $250,000 for a joint and survivorship annuity that will pay $15,000 per year as long as one of them is alive. The multiple that will be used in determining the ex...
You have accumulated some money for your retirement. You are going to withdraw $74,959 every year at the beginning of the year for the next 16 years starting from today. How much money have you acc...
An investment offers $9,885 per year for 14 years, with the first payment occurring one year from now. If the required return is 8.5%, what is the present value of the investment?
You are saving for the college education of your five children. They are one year apart in age; one will begin college in 10 years (Year 10), another in 11 years, another in 12 years, another in 13...
If you pay addition $5,000 toward principle at the end of the 8 years, how many more months will loan exist after the eighth year if you continue to make the scheduled monthly payments?
Simon recently received a credit card with a 15% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $480. The minimum payment on the card is only $20 per month. A) If Simon m...
Please provide answers to the following problems using Excel. Sara is considering taking early retirement, having saved KD 200,000. She desires to determine how many years the savings will last if...
Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $490. The minimum payment on the card is only $20 per month. If Simon make...
Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $420. The minimum payment on the card is only $10 per month. If Simon make...
On December 31, 2014 Michael McDowell desires to have $60,000. He plans to make six deposits in a fund to provide this amount. Interest is compounded annually at 12%. Compute the equal annual amoun...
Meg's pension plan is an annuity with a guaranteed return of 4% per year (compounded quarterly). She would like to retire with a pension of $40,000 per quarter for 25 years. If she works 37 years b...
Annuity X promises to pay you $2,000 a year for 25 years in exchange for $19,000 today. Annuity Y has the same riskiness, and thus the same discount rate, as Annuity X, and promises to pay you $5,3...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $3 million in its first year and that this...
You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $2 million in its first year and this amou...
You belong to an unusual pension plan because your retirement payments will continue forever (and will go to your descendants after you die). If you will receive $5,000 per month every month foreve...
You have decided to start planning for your retirement by analyzing different retirement plans. The plan offered by IRA Managers requires you to deposit $5,000 at the beginning of each of the next...
You decide to open an individual retirement account (IRA) at your local bank that pays 7% per year. At the end of each of the next 40 years, you will deposit $5,000 per year into the account (40 to...
Patty Schleis invests $5,146.12 now for a series of $1,000 annual returns beginning one year from now. Patty will earn a return of 11% on the initial investment. How many annual payments of $1,000...
Consider a borrower that is approved for a standard 15-year, fully amortizing house mortgage with an original balance of $500,000 and a note rate (annual interest rate) of 4.8%. (Standard refers to...
At the end of each year for the next 10 years, you will receive cash flows of $500. If the appropriate discount rate is 5.5%, how much would you pay for this annuity? a. $3,768.81 b. $3,956.36 c...
As soon as he graduated with an engineering degree and started working, John bought a car for $40,000. A down payment of $10,000 was paid by his dad as a graduation gift. The rest of the amount wa...
What is the WITHDRAWAL $___per month - You are planning to save for retirement over the next 30 years. To do this, you will invest $750 per month in a stock account and $350 per month in a bond acc...
Calculate the present value of annual payments of $3,000 per year for ten years at 8%: a. Ordinary Annuity b. Annuity Due
Your financial planner offers you two different investment plans. Plan X is a $10,000 annual perpetuity. Plan Y is an 18-year, $18,000 annual annuity. Both plans will make their first payment one y...
Your financial planner offers you two different investment plans. Plan X is a $17,000 annual perpetuity. Plan Y is a 16-year, $27,000 annual annuity. Both plans will make their first payment one ye...
Jane has a $35,000 bank loan that she wishes to pay off in five equal annual payments with 12% interest. If the first payment is due one year from today, what will be the amount of the annual payme...
An ATM with a service fee of $2 is used by a person 100 times in a year. What would be the future value in 10 years (use a 3 percent rate) of the annual amount paid in ATM fees?
Lindsay is 25 years old and has a new job in Web development. Lindsay wants to make sure she is financially sound in 30 years, so she plans to invest the same amount into a retirement account at th...
Lindsay is 25 years old and has a new job in web development. Lindsay wants to make sure she is financially sound in 30 years, so she plans to invest the same amount into a retirement account at th...
Lindsay is 25 years old and has a new job in Web development. Lindsay wants to make sure she is financially sound in 30 years, so she plans to invest the same amount into a retirement account at th...
All of the following variables are required to determine an interest rate for an annuity due except: a. the payment amount b. the present or future value c. the payment term d. the number of compou...
Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years. The first payment is due six months after the pu...
For $100,000, Smith purchases a 36-payment annuity-immediate with monthly payments. Assume an effective annual interest rate of 12.68%. Find the unknown amount X if the first payment is X and each...
You have been approved for a $70,000 loan toward the purchase of a new home at 15% interest. The mortgage is for 30 years. How much are the approximately annual payments of the loan? (a) $7425 (b)...
Sara Shouppe has invested $102,000 in an account at her local bank. The bank will pay her a constant amount each year for 6 years, starting one year from today, and the account's balance will be 0...
What type of annuity is this? To make sure that Janet has the skills to do the job, Tom plans to give her a short test. As far as Tom is concerned, the single most important concept in financial p...
At the end of this month, Les will start saving $200 a month for retirement through his company's retirement plan. His employer will contribute an additional $.50 for every $1.00 that he saves. If...
Cole Hannah is a 25 year old person who wants to retire at age 65. He believes he will need an income of $200,000 per year to live comfortably. Assume a discount rate of 7.5%. Also, assume that he...
MONTHLY PMT= ? N=40 INFLATION RATE=2.50% SAVING RATE=10% FV=1,500,000 Manually (show formula), using the BAIIPlus, and Excel
Travis is buying a car with monthly payments of $2156 per month for 4 years. The cash flow pattern is best described as a(an) _____.
A safety improvement project has a capital cost of $100,000 and annual maintenance costs of $20,000. The salvage value of the project at the end of 5 years is $30,000. Determine the total costs as...
A company is considering the purchase of a new automated inventory retrieval system to reduce costs. The new inventory retrieval system will cost $560,000. How much must be saved each year to reco...
Robert Smith places $200 of his monthly child support check into an annuity for the education of his child. He does this at the end of each month for 10 years into an account paying 7% interest com...
Real Cash Flows You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $950 a month in a stock account in real dollars and $450 a month in a bond a...
The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $320,000 per year for the next 10 years and an additional $1,110,000 at the end of the 10th year. The seller of...
What is the perpetual annual worth in the following situation? First cost: $80,000 Annual cost : $10,000 Salvage value: $25,000 Life: 6 years Interest rate: 10%
Robert Hitchcock is 40 years old today, and he wishes to accumulate $500,000 by the time he is 65 so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by maki...
Mr. Albertson will graduate with an engineering BS degree before his 25th birthday, and start his first professional job immediately upon his graduation. Mr. Albertson decides to set up a retiremen...
Suppose that your rich uncle has $1,000,000 that he wishes to distribute to his heirs at the rate of $100,000 per year. If the $1,000,000 is deposited in a bank account that earns 6% interest per y...
Determine the answer to the following independent situation. (Round answers to the nearest whole number.) (c) The present value of an annuity of $9,000 per year for six years discounted at 10 perc...
Grace was informed by her boss today that shell be receiving a commission of P120,000.00 in 6 monthly installment at 5% interest rate. She has the option of claiming it either by getting it before...
A family member passes away and leaves you an inheritance. The terms of the will specify that you may choose between annual payments of $50,000 at the end of each of 5 years, or a lump sum payment...
What's the interest rate of a 8-year, annual $3,700 annuity with present value of $20,000?
What's the interest rate of a 5-year, annual $4,100 annuity with the present value of $15,500?
What is the interest rate of a 6-year, annual $4,500 annuity with present value of $20,000? (Round you
What's the interest rate of a nine-year, annual $4,700 annuity with a present value of $23,248?
What's the interest rate of a 6-year, annual $4,300 annuity with a present value of $20,000?
What is the interest rate of a 5-year, annual $5,000 annuity with a present value of $20,000?
What's the interest rate of a 7-year, annual $3,800 annuity with present value of $20,000?
Over recent years, the United States has gone from being a "positive savings" to a "negative savings" nation (i.e. we spend more money than we earn). Suppose a typical American household spend $10,...
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