a. Alpha Company is considering prepaying their rent for the next 4 years to avoid a price increase. Currently they pay $8,000 per year. Calculate the present value of the rent payments to determine what amount Alpha should pay today if current interest rates are 12% and interest is compounded annually.

 b. Omega, Inc. won a lawsuit and will be receiving $400,000 at the end of 5 years. Calculate the present value of this award if interest is compounded semiannually and the current interest rate is 1) 18% and 2) 10%.

 c. Bonnie has just received news of an inheritance. She will be receiving $10,000 per year for the next 20 years and a lump sum payout after 20 years of $200,000. Calculate the present value of her inheritance if the current interest rate is 9% and it is compounded annually.

Answer rating: 100% (QA)

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