Lloyd is a divorce attorney who practices law in Florida. He wants to join the A

Question

Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues for the ADLA are $750 per year and must be paid at the beginning of each year. For instance, membership dues for the first year are paid today, and dues for the second year are payable one year from today. However, the ADLA also has an option for members to buy a lifetime membership today for $7,000 and never have to pay annual membership dues. Obviously, the lifetime membership isn't a good deal if you only remain a member for a couple of years, but if you remain a member for 40 years, it's a great deal. Suppose that the appropriate annual interest rate is 8.9%, what is the minimum number of years that Lloyd must remain a member of the ADLA so that the lifetime membership is cheaper (on a present value basis) than paying $750 in annual membership dues? (Note: Round your answer up to the nearest year.) O 18 years O 17 years O 13 years 15 years In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 4% annual interest rate, what is its value as of 2012 (386 years later)? O $76,647,701.66 O $119,029,371.99 $103,699,831.66 O $90,173,766.66

Explanation / Answer

For every year annual membership payment present value at 8.9% is calculated. When the present values are accumulated, from payment 17 onwards they exceed $7,000, that means if lyord remains member for atleast 17 years she can benefit from taking life time membership.

Hence, the answer is 17 years.

Question 2:

*Hope the above explanation helps, please comment if further explanation is required. Your rating is appreciated*

Year Payment Discount factor Present value Cummulative value Life time payment benefit 1.00             750.00            750.00 -6,250.00                2 750.00 0.918274             688.71         1,438.71 -5,561.29                3 750.00 0.843226             632.42         2,071.13 -4,928.87                4 750.00 0.774313             580.73         2,651.86 -4,348.14                5 750.00 0.711031             533.27         3,185.13 -3,814.87                6 750.00 0.652921             489.69         3,674.82 -3,325.18                7 750.00 0.59956             449.67         4,124.49 -2,875.51                8 750.00 0.55056             412.92         4,537.41 -2,462.59                9 750.00 0.505565             379.17         4,916.59 -2,083.41             10 750.00 0.464247             348.19         5,264.77 -1,735.23             11 750.00 0.426306             319.73         5,584.50 -1,415.50             12 750.00 0.391465             293.60         5,878.10 -1,121.90             13 750.00 0.359472             269.60         6,147.71     -852.29             14 750.00 0.330094             247.57         6,395.28     -604.72             15 750.00 0.303117             227.34         6,622.61     -377.39             16 750.00 0.278344             208.76         6,831.37     -168.63             17 750.00 0.255596             191.70         7,023.07         23.07             18 750.00 0.234707             176.03         7,199.10       199.10             19 750.00 0.215525             161.64         7,360.74       360.74             20 750.00 0.197911             148.43         7,509.18       509.18             21 750.00 0.181737             136.30         7,645.48       645.48             22 750.00 0.166884             125.16         7,770.64       770.64             23 750.00 0.153245             114.93         7,885.57       885.57             24 750.00 0.140721             105.54         7,991.12       991.12             25 750.00 0.12922               96.92         8,088.03    1,088.03             26 750.00 0.11866               88.99         8,177.03    1,177.03             27 750.00 0.108962               81.72         8,258.75    1,258.75             28 750.00 0.100057               75.04         8,333.79    1,333.79             29 750.00 0.09188               68.91         8,402.70    1,402.70             30 750.00 0.084371               63.28         8,465.98    1,465.98             31 750.00 0.077475               58.11         8,524.08    1,524.08             32 750.00 0.071144               53.36         8,577.44    1,577.44             33 750.00 0.065329               49.00         8,626.44    1,626.44             34 750.00 0.05999               44.99         8,671.43    1,671.43             35 750.00 0.055087               41.32         8,712.75    1,712.75             36 750.00 0.050585               37.94         8,750.69    1,750.69             37 750.00 0.046451               34.84         8,785.52    1,785.52             38 750.00 0.042655               31.99         8,817.52    1,817.52             39 750.00 0.039169               29.38         8,846.89    1,846.89             40 750.00 0.035968               26.98         8,873.87    1,873.87             41 750.00 0.033028               24.77         8,898.64    1,898.64             42 750.00 0.030329               22.75         8,921.39    1,921.39             43 750.00 0.02785               20.89         8,942.27    1,942.27             44 750.00 0.025574               19.18         8,961.45    1,961.45             45 750.00 0.023484               17.61         8,979.07    1,979.07             46 750.00 0.021565               16.17         8,995.24    1,995.24

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