PLease show work, I really need help understanding these. The way they are worde
ID: 2383253 • Letter: P
Question
PLease show work, I really need help understanding these. The way they are worded always trips me up. I need to provide what PMT , PV, FV, I/R , and # payments (N)
1) What is the value today of a money machine that will pay $100 per year for 5 years? Assume the first payment is made one year from today and interest rate is 7%
2) You will deposit $200 per year for 10 years into an account that earns 5%. The first deposit is made next year. How much will be in the account 10 years from today?
3) If you are willing to pay $2,000 today to receive $100 per year forever, then your required rate of return must be______%. Assume the 1st payment is received one year from today.
4) Value today of receiving $500 per year forever? Assume the 1st payment is made 3 years from today, and interest rate is 10%.
5) value today of an account that will pay $100 every 6 months for 10 years? Assume the 1st payment is made two year from today and the annual interest rate is 8%
(Bonus) You have $1,000 in your account today. And you will deposit $200 per year for 10 years into the account that earns 5%. The first deposit is made next year. How much will be in the account 15 years from today?
Explanation / Answer
1
year
Rs
7% discount
1
100
0.934579
93.46
2
100
0.873439
87.34
3
100
0.816298
81.63
4
100
0.762895
76.29
5
100
0.712986
71.30
Value today
410.02
2
1
200
0.909091
181.8182
2
200
0.826446
165.2893
3
200
0.751315
150.263
4
200
0.683013
136.6027
5
200
0.620921
124.1843
6
200
0.564474
112.8948
7
200
0.513158
102.6316
8
200
0.466507
93.30148
9
200
0.424098
84.81952
10
200
0.385543
77.10866
account 10 years from today
1228.913
3
If you are willing to pay $2,000 today to receive $100 per year forever, then your required rate of return must be_5_____%(100/2000)
4
Value today of receiving $500 per year forever? Assume the 1st payment is made 3 years from today, and interest rate is 10%. 3756.57
3756.57
Workings
= 500*100/10
5000
year
1
0.909091
2
0.826446
3
5000
0.751315
3756.574
5
payment made semi annual hence I =8/2 =4
Present Value Factor for an Ordinary Annuity at4%
13.5903
cash flow 100*13.5903
1359
Year
1
0.9259
2
1359
0.8573
1165
value today payment is made two year from today and the annual interest rate is 8% is $1165
1
year
Rs
7% discount
1
100
0.934579
93.46
2
100
0.873439
87.34
3
100
0.816298
81.63
4
100
0.762895
76.29
5
100
0.712986
71.30
Value today
410.02
2
1
200
0.909091
181.8182
2
200
0.826446
165.2893
3
200
0.751315
150.263
4
200
0.683013
136.6027
5
200
0.620921
124.1843
6
200
0.564474
112.8948
7
200
0.513158
102.6316
8
200
0.466507
93.30148
9
200
0.424098
84.81952
10
200
0.385543
77.10866
account 10 years from today
1228.913
3
If you are willing to pay $2,000 today to receive $100 per year forever, then your required rate of return must be_5_____%(100/2000)
4
Value today of receiving $500 per year forever? Assume the 1st payment is made 3 years from today, and interest rate is 10%. 3756.57
3756.57
Workings
= 500*100/10
5000
year
1
0.909091
2
0.826446
3
5000
0.751315
3756.574
5
payment made semi annual hence I =8/2 =4
Present Value Factor for an Ordinary Annuity at4%
13.5903
cash flow 100*13.5903
1359
Year
1
0.9259
2
1359
0.8573
1165
value today payment is made two year from today and the annual interest rate is 8% is $1165
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