Answer the following questions. Provide explanations for each: a. A customer purchases $20,000 of goods. The goods

Question:

Answer the following questions. Provide explanations for each:

a. A customer purchases $20,000 of goods. The goods will be paid for in cash in three years. How much revenue should be recorded on the date the goods are delivered, assuming a discount rate of 8 percent?

b. Would you pay $7,000 for an investment opportunity that will pay you $4,000 in one year, $3,000 in two years, and $2,000 in three years, if your discount rate is 12 percent?

c. A "zero coupon bond" is a type of long-term debt that pays no interest, but simply pays a single amount on the date the bond matures. Your broker offers you a zero coupon bond that will pay $5,000 in 20 years. How much would you pay for the bond today, if your discount rate is 10 percent?

d. At a discount rate of 8 percent, what is the maximum you would pay for an investment that will pay you $6,000 in one year, $4,000 in two years, and $8,000 in three years?

e. If your discount rate is 10 percent, would you prefer $10,000 today or $15,000 in five years?

Broker
A broker is someone or something that acts as an intermediary third party, managing transactions between two other entities. A broker is a person or company authorized to buy and sell stocks or other investments. They are the ones responsible for... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...