Question

In: Finance

You are in a car​ accident, and you receive an insurance settlement of ​$ 4000 per...

You are in a car​ accident, and you receive an insurance settlement of ​$ 4000 per year for the next three years. The first payment is to be received today. The second payment is to be received one year from​ today, and the third payment two years from today. If the interest rate is 4​%, the present value of the insurance settlement is ​$____ .​ (Round your response to the nearest two decimal​ place)

Solutions

Expert Solution

Let the Cash Flows for Year n be denoted by CFn

Interest Rate = r = 4% or 0.04

Hence, NPV = Σ CFn/(1+r)n

Given

CF0 = 4000
CF1 = 4000
CF2 = 4000

Hence, NPV = 4000 + 4000/(1+0.04) + 4000/(1+0.04)2 = $11544.38

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

A car accident expert is assigned to a case where the insurance company suspects the car...
A car accident expert is assigned to a case where the insurance company suspects the car company to use lower quality steel (lower TS) than the standards in their bumpers. The expert is given a post-crash bumper to run his test on. Since the bumper is completely deformed, he cannot place it into the normal bumper tensile tester. He is thinking about running a hardness test on the deformed bumper to estimate the TS of the steel to test the...
Which is not a right of ownership in a life insurance policy? Receive dividends Change settlement...
Which is not a right of ownership in a life insurance policy? Receive dividends Change settlement options Change irrevocable beneficiaries at will Borrow against the policy
You, a car accident investigation expert, are assigned a case where the insurance company suspects that...
You, a car accident investigation expert, are assigned a case where the insurance company suspects that the car company did not properly account for the fatigue failure when designing the axle of their car. You are given a sample of a broken front-right axle to determine if the axle failure was a fatigue failure. You were told that the axle broke when the car traveling at 45 mph hit a pothole in the road. How will you most efficiently determine...
The insurance settlement pays you $50,000 in one year, growing at 6$ per year for a...
The insurance settlement pays you $50,000 in one year, growing at 6$ per year for a total of 10 years. a. The discount rate is 4% b. What is the value today?
Consider the following car insurance problem. A car accident occurs with probability 1/36. The loss from...
Consider the following car insurance problem. A car accident occurs with probability 1/36. The loss from the accident is $4,000. The price of the coverage is $150. Should a wealthy person purchase the coverage?
A car insurance company has determined that 10% of drivers were involved in a car accident last year.
A car insurance company has determined that 10% of drivers were involved in a car accident last year. If 3 drivers are randomly selected, what is the probability of getting: a) one driver involved in a car accident last year? P(x = 1) = b) fewer than two drivers who were involved in a car accident last year? P(x2)= 
A car insurance company would like to determine the proportion of accident claims covered by the...
A car insurance company would like to determine the proportion of accident claims covered by the company. According to a preliminary estimate 40% of the claims are covered. How large a sample should be taken to estimate the proportion of accident claims covered by the company if we want to be 90% confident that the sample percentage is within  2% of the actual percentage of the accidents covered by the insurance company?
A car insurance company would like to determine the proportion of accident claims covered by the...
A car insurance company would like to determine the proportion of accident claims covered by the company. According to a preliminary estimate, 60 percent of the claims are covered. How large a sample should be taken to estimate the proportion of accident claims covered by the company if we want to be 98 percent confident that the sample percentage is within ±3 percent of the actual percentage of the accidents covered by the insurance company?
'driver', 'car', 'accident' and 'report' are names of some tables in the insurance database system. These...
'driver', 'car', 'accident' and 'report' are names of some tables in the insurance database system. These tables were created by executing the following SQL creation statements. CREATE TABLE driver( driverID INT NOT NULL PRIMARY KEY, name VARCHAR(30) NOT NULL, cityAddress VARCHAR(25) ); CREATE TABLE car( plateID INT NOT NULL PRIMARY KEY, model VARCHAR(20) NOT NULL, year YEAR(4) NOT NULL ); CREATE TABLE accident( reportNumber INT NOT NULL PRIMARY KEY, date Date NOT NULL, location VARCHAR(20) NOT NULL ); CREATE TABLE...
A car insurance company has determined that 9% of all drivers were involved in a car accident last year.
A car insurance company has determined that 9% of all drivers were involved in a car accident last year. Among the 11 drivers living on one particular street, 3 were involved in a car accident last year. If 11 drivers are randomly selected, what is the probability of getting 3 or more who were involved in a car accident last year?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT