7. An investor has found a fund that pays 3% nominal annual interest compounded monthly for two...
Question:
7. An investor has found a fund that pays 3% nominal annual interest compounded monthly for two years. The investor must pay a $20,000 deposit at the beginning of the investment. After the investment matures, the finance company will charge a fee of 1.5% of the fund's balance. (a) Draw a cash flow diagram of the fund. (3 marks) (b) What is the value of the fund at maturity, including the application of the fee? (3 marks) (c) What is the effective annual interest rate of the fund, including the application of the fee? (3 marks) 8. SlamCo has been hired to do a study on a modular nuclear reactor generator plan. The plan is to go to the end of 2075. The electrical transmission system will need some upgrade and the distribution system within major centres will need upgrades also. Construction would begin in 2025 and take 10 years at a cost of $30 million per year. The cost of maintenance starts after construction has been completed and for the first year is $4 million, increasing by $100,000 per year each year thereafter. Assume all cash flows occur at year end. Consider the present to be the end of 2020/beginning of 2021. Assume there is no salvage value at the end of 2075. If the interest rate is 5% nominal annual, compounded monthly, what is the present worth of this project? (10 marks)
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill