Final Exam (07/02/2018) 18. ST Trucking just signed a $3.8 million contract. The

Question

Final Exam (07/02/2018) 18. ST Trucking just signed a $3.8 million contract. The contract calls fxdhat is million today, $1.3 million one year from today, and S1.4 million two this contract worth today at a discount rate of 8.7 percent? for a payment of $1.1 A. $3,783,648.48 B. $3,480,817.37 C. $2,108,001.32 D. $3,202,223.89 E. $3,202,840.91 year. She has decided to leave the $14 interest earned on last year's 19. Jamie earned $14 in interest on her savings account last in her account so that she can earn interest on the $14 this year. The interest earnings is called: A. simple interest. B. complex interest. C. accrued interest. D. interest on interest. E. discounted interest

Explanation / Answer

ans 18

Present value of all inflows = 1.1 + (1.3 x PVIF @8.7% for 1 year) + (1.4 x PVIF @8.7% for 2 year)

Present value of all inflows = 1.1 + 1.3 x (1/1.087) +1.4 x (1/1.0872) = 1.1 + 1.1959 + 1.1849 = 3.4808

ans 19

Jamie earned $14 in interest on her savings account last year. She has decided to leave the $14 in her account so that she can earn interest on the $14 this year. The interest earned on last year's interest earnings is called:

correct answer : interest on interest

when we deposit amount in a bank for a year, interest received at the end of the year is called simple interest. now if we keep that interest in account, then not only our deposit but interest will also get interest, so it is called interest on interest.

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