Question: 12. value: 1.50 points A store will give you a 1.50% discount on the cost of your purchase if you pay cash today. Otherwise, you
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| A famous quarterback just signed a $16.5 million contract providing $3.3 million a year for 5 years. A less famous receiver signed a $15.5 million 5-year contract providing $4 million now and $2.3 million a year for 5 years. The interest rate is 10%. |
| a. | What is the PV of the quarterback's contract?(Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| Present value | $million |
| b. | What is the PV of the receiver's contract?(Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
11. value: 1.50 points
| A couple will retire in 50 years; they plan to spend about $34,000 a year in retirement, which should last about 25 years. They believe that they can earn 7% interest on retirement savings. |
| a. | If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year.(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Annual payment | $ |
| b. | How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $64,000 on their childs college education?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Annual payment | $ |
| Present value | $million |
| c. | Who is better paid? | ||
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| a. | How much will $100 grow to if invested at a continuously compounded interest rate of 9.75% for 7 years?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Future value | $ |
| b. | What if it is invested for 9.75 years at 7%?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Future value | $ |
| In April 2013 a pound of apples cost $1.48, while oranges cost $1.12. Three years earlier the price of apples was only $1.27 a pound and that of oranges was $.98 a pound. |
| a. | What was the annual compound rate of growth in the price of apples?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| Compound annual growth rate | % per year |
| b. | What was the annual compound rate of growth in the price of oranges?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| Compound annual growth rate | % per year |
| c. | If the same rates of growth persist in the future, what will be the price of apples in 2030?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Price | $ |
| d. | If the same rates of growth persist in the future, what will be the price of oranges in 2030?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Price | $ |
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