Q7. Anna wants to buy an insurance plan for her newborn. To purchase the policy, Anna...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Q7. Anna wants to buy an insurance plan for her newborn. To purchase the policy, Anna needs to pay make the following payment to the insurance company. 2nd birthday: $700 3rd birthday: $800 4th birthday: $900 5th birthday: $1000 6th birthday: $1100 7th birthday: $1200 No more payment is required after the seventh birthday. The policy will pay Anna's child $300,000 on her child's 60th birthday. If the relevant interest rate is 10% per year and Anna's child will live to 60 years old, is this policy worth buying? Why? Q8. A financial planner has recommended two investment plans that have the same investment cost. Under Plan A, you will receive a perpetual payment of $20,000 annually, while under Plan B, you will receive an annual payment of $50,000 for 10 years. Both plans will pay out their first installment one year from today. Assuming that the interest rates for both plans are equal, what interest rate would make you indifferent to choosing between the two plans? Q7. Anna wants to buy an insurance plan for her newborn. To purchase the policy, Anna needs to pay make the following payment to the insurance company. 2nd birthday: $700 3rd birthday: $800 4th birthday: $900 5th birthday: $1000 6th birthday: $1100 7th birthday: $1200 No more payment is required after the seventh birthday. The policy will pay Anna's child $300,000 on her child's 60th birthday. If the relevant interest rate is 10% per year and Anna's child will live to 60 years old, is this policy worth buying? Why? Q8. A financial planner has recommended two investment plans that have the same investment cost. Under Plan A, you will receive a perpetual payment of $20,000 annually, while under Plan B, you will receive an annual payment of $50,000 for 10 years. Both plans will pay out their first installment one year from today. Assuming that the interest rates for both plans are equal, what interest rate would make you indifferent to choosing between the two plans?
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully amortizing fixed rate mortgage with 80% LTV, an annual interest rate of 4%, with monthly compounding and...
-
A Hydrogen atom has one proton in the nucleus and one electron in the shell. In a classic model of the atom, in a certain state, this electron is in a circular orbit around the nucleus with an...
-
Further processing decision (continuation of 18-30). Elsie has decided that buttermilk may sell better if it was marketed for baking and sold in pints. This would involve additional packaging at an...
-
Wayland wants to buy a deli that is for sale, but the owner has put too high a value on the businesss goodwill. Goodwill is a. the value of the leftover products the deli gives to the local food...
-
When calculating a firms return on total assets (ROA) ratio, some investment professionals modify the ROA ratio by adding back the interest expense paid by a firm to its creditors, on a net-of-taxes...
-
Sams Auto Shop services and repairs a particular brand of foreign automobile. Sam uses oil filters throughout the year. The shop operates 52 weeks per year, and weekly demand is 150 filters. Sam...
-
What is Disney's market value of equity? (2pts) Hint: You may use the closing stock price at the fiscal year-end and the number of common shares outstanding on the income statement used for basic EPS...
-
1. Which process should VBB choose to produce?? 2. How much would VBP be willing to pay for the testing that is currently offered, for each batch?? 3. Would we be considered a perfect test, at twice...
-
Ivanhoe Company has completed all of its operating budgets. The sales budget for the year shows 43,000 units and total sales of $1,935,000. The total unit cost of producing one unit is $25. Selling...
-
discuss the role of unconscious bias in perpetuating systemic inequalities in recruitment, promotion, and decision-making processes, and what interventions have proven effective in mitigating its...
-
1. A retail store wants to decide on how many copies of a DVD player to purchase at the start of the upcoming selling season. The DVD player selling price is $17. The supplier sells the DVD player to...
-
The following accounts receivable information pertains to Select Distributors. Past Due Category, Accounts Receivable Total, Uncollectible Percentage, respectively are: 0 3 0 days, $ 9 4 5 , 6 2 0 ,...
-
Examine potential long-term solutions to address nursing staffing shortages and consider how local labor markets and other market factors influence staffing and budgeting. Need help/an example of...
-
1) showed the needed resources, activities conducted, and program outputs. 2) How The hierarchy of intended outcomes starting with initial, intermediate, and long-term changes in knowledge, skills,...
-
Viejol Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $250,000 (40% variable and 60% fixed), direct...
-
The maximum pressure that can be developed for a certain fluid power cylinder is 15.0 MPa. Compute the required diameter for the piston if the cylinder must exert a force of 30 kN.
-
In 20-- the annual salaries paid each of the officers of Abrew, Inc., follow. The officers are paid semimonthly on the 15th and the last day of the month. Compute the FICA taxes to be withheld from...
-
What kind of problem can be encountered when requesting references from previous employers of job applicants?
-
The wages and hours information for five employees of McNeese Enterprises for the week ended July 8 is given below. Employees work a standard 40-hour workweek and are paid time and one half for all...
-
Think of the last position you had or the current job you are in. What type of organizational structure was in place? Was it working for the organization? Did you feel comfortable within the...
-
Professional practice models allow for autonomous nursing practice. This concept is based on the relationship between the worker and the workplace. An example of a professional practice model is: A....
-
Determine what your personal values are, and compare them with those of a local health-care setting. Do you see a fit with your values and those of the organization?
Study smarter with the SolutionInn App