Assume annulty payments are made at the end of each period. a) If you need $20,000...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume annulty payments are made at the end of each period. a) If you need $20,000 at the end of five years to purchase an automobile, what lump sum must be invested now, assuming 6% percent interest compounded annually? b) In the question above, instead of a depositing a lump sum now to purchase the automobile you decided to make annual deposits for 5 years, beginning at the end of this year. Assume the same interest as above. How much must you deposit annually? c) If you were to deposit $2,000 every six months, starting six months from now, how much would you have six years from now assuming 8% interest compounded semi- annually (4% every six months)? d) Someone offers to give you $1.500 for old car (which is probably more than what your car is worth!). The catch is, they cannot pay you for two years. What is the present value of this offer assuming a 10% interest rate compounded annually? Somebody else wants your old car. They will pay you $500 now, $500 in twelve months, and $500 in eighteen months. What is present value of these payments assuming a 10% interest rate compounded semi-annually (5% every six months)? Assume annulty payments are made at the end of each period. a) If you need $20,000 at the end of five years to purchase an automobile, what lump sum must be invested now, assuming 6% percent interest compounded annually? b) In the question above, instead of a depositing a lump sum now to purchase the automobile you decided to make annual deposits for 5 years, beginning at the end of this year. Assume the same interest as above. How much must you deposit annually? c) If you were to deposit $2,000 every six months, starting six months from now, how much would you have six years from now assuming 8% interest compounded semi- annually (4% every six months)? d) Someone offers to give you $1.500 for old car (which is probably more than what your car is worth!). The catch is, they cannot pay you for two years. What is the present value of this offer assuming a 10% interest rate compounded annually? Somebody else wants your old car. They will pay you $500 now, $500 in twelve months, and $500 in eighteen months. What is present value of these payments assuming a 10% interest rate compounded semi-annually (5% every six months)?
Expert Answer:
Answer rating: 100% (QA)
Answers to your annuity questions a Lump Sum Investment To calculate the present value PV of the future sum neededwe can use the formula for a future ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these accounting questions
-
On 1 May 2015, your company acquired a machine at a cost of $300,000. This machine has an expected a useful life of 20 years in normal conditions, and a residual amount of $10,000. The financial year...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
The following are the Year 9 income statements of Kent Corp. and Laurier Ltd. Additional Information ¢ Kent acquired its 40% interest in the common shares of Laurier in Year 3 at a cost of...
-
Estimates indicate that during the late 2000s, the poorest 40 percent of the population earned about 15 percent of total income in Argentina. In Brazil, the poorest 40 percent earned about 10 percent...
-
Amwal Corporation had the following costs (in thousands of pounds) over the past six years. Describe what has beenhappening. Year Sales value 1 2 34 5 6 623 625 626 635 677 810 Costs: Design...
-
What lease payments are used in determining whether the present value of lease payments is greater than or equal to substantially all of the fair value of the underlying asset?
-
Hall Company had sales in 2014 of $1,560,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $500,000. A new raw material is available that will decrease the variable costs...
-
1) DBZ Machineries, dealer of machinery and equipment, leased equipment to Best Products on July 01, 2021. The lease is appropriately accounted for as a sale by DBZ Machineries and a purchase by Best...
-
Your client, Bigco, is considering buying Littleco. Littlecos particulars are as follows: Assets: FMV=100mm; adjusted basis 40mm Liabilities: none Market Value of stock: 130mm Location: Incorporated...
-
A manufacturer of automobile transmissions uses two different processes. Management ordered a study of the production costs to see if there is a difference between the two processes. A summary of the...
-
Statement of Objectives The main objective of this case study is to assess the effectiveness of the Kaizen Fitness Program in addressing the challenges faced by the gym and improve the gym's revenue...
-
[20 By using elementary operations, find the inverse of the matrix A = 5 1 Lo 1 3 [10]
-
Freedom Corporation acquired a fixed asset for $ 2 4 0 , 0 0 0 . Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 6 % and an income tax...
-
Prove that: cot 4x(sin 5x + sin 3x) = cotx (sin 5x - sin 3x)
-
a) Describe the main objectives of reminder advertising. b) Describe at least 3 main objectives of information advertising.
-
Project A Project B Project C Project D Project E Year Cash Flows 0123456789 -$20,000 -$600,000 -$150,000 -$760,000 -$100,000 $3,000 $120,000 $18,000 $185,000 0 3,000 145,000 17,000 185,000 0 3,000...
-
In Problem 8.43, determine the smallest value of for which the rod will not fall out of the pipe. IA -3 in.-
-
On July 1, 2012, Ted, age 73 and single, sells his personal residence of the last 30 years for $365,000. Ted's basis in his residence is $35,000. The expenses associated with the sale of his home...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1 and 2. On September 1, Irene opened a retail store that specializes in sports car...
-
Janie graduates from high school in 2012 and enrolls in college in the fall. Her parents pay $4,000 for her tuition and fees. a. Assuming Janie's parents have AGI of $170,000, what is the American...
-
Write the following in standard form. a. \((4+5 i)(2-3 i)\). b. \((1+i)^{3}\). c. \(\frac{5+3 i}{1-i}\).
-
Write the following in polar form, \(z=r e^{i \theta}\). a. \(i-1\). b. \(-2 i\). c. \(\sqrt{3}+3 i\).
-
Find all \(z\) such that \(z^{4}=16 i\). Write the solutions in rectangular form, \(z=a+i b\), with no decimal approximation or trig functions.
Study smarter with the SolutionInn App