ABC company has a $2,000,000 liability due in 10 years. They plan to invest $500,000 in a
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Question:
ABC company has a $2,000,000 liability due in 10 years. They plan to invest $500,000 in a bond that pays 4% interest compounded annually, with the expectation of using the proceeds to pay off a portion of the liability at the end of 10 years.
Assuming an annual discount rate of 6%, calculate:
- The present value of the liability due in 10 years.
- The future value of the bond investment in 10 years.
- The amount of the liability that the company can pay off at the end of 10 years using the proceeds from the bond investment, if the company wants to have no outstanding liability after the payment.
Show all calculations and provide answers to the nearest dollar.
Related Book For
Contemporary Business Mathematics with Canadian Applications
ISBN: 978-0134141084
11th edition
Authors: S. A. Hummelbrunner, Kelly Halliday, Ali R. Hassanlou, K. Suzanne Coombs
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