Question

In: Accounting

a. How much would you have to deposit today if you wanted to have $51,000 in...

a. How much would you have to deposit today if you wanted to have $51,000 in three years? The annual interest rate is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.) b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 6% on your investments, how much would you have to deposit today to have $13,500 when you graduate? (Round your answer to 2 decimal places.) c-1. Calculate the future value of an investment of $607 for nine years earning an interest of 10%. (Round your answer to 2 decimal places.) c-2. Would you rather have $607 now or $1,000 nine years from now? d. Assume that a college parking sticker today costs $74. If the cost of parking is increasing at the rate of 6% per year, how much will the college parking sticker cost in seven years? (Round your answer to 2 decimal places.) e. Assume that the average price of a new home is $119,000. If new homes are increasing at a rate of 10% per year, how much will a new home cost in seven years? (Round your answer to 2 decimal places.) f. An investment will pay you $8,500 in 10 years, and it will also pay you $270 at the end of each of the next 10 years (years 1 thru 10). If the annual interest rate is 6%, how much would you be willing to pay today for this type of investment? (Round your intermediate calculations and final answer to the nearest whole dollar.) g. A college student is reported in the newspaper as having won $9,000,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $9.0 million now. Instead she will receive $450,000 at the end of the year for each of the next 20 years. If the annual interest rate is 7%, what is the present value (today’s amount’) that she won? (ignore taxes). (Round your answer to nearest whole dollar.)

Solutions

Expert Solution

a)

FUTURE VALUE=51000 DURATION 3 YEARS INTEREST RATE=10%

PRESENT VALUE=FUTURE VALUE * 1/(1+interest rate)^n

= 51000 * 1/(1+0.1)^3

   = 51000 / 1.331 =38317. DEPOSIT NOW TO EARN 51000 AFTER 3 YEARS

b)

2 YEAR DURATION ,INTEREST RATE=6%

PRESENT VALUE = 13500/(1.06)^2

=13500/1.123

= 12015 DEPOSIT NOW TO EARN 13500 AFTER 2 YEARS

c)1

FUTURE VALUE 607 AFTER 9 YEARS INTEREST RATE =10%

FUTURE VALUE = PRESENT VALUE * (1+INTEREST RATE)^n

=607 * (1+0.10)^9

=607 * 2.36 = 1432.52

c)2

FUTURE VALUE OF 607 AFTER 9 YEARS= 607 *(1+1.06)^9

=607*1.69 =1025

WHICH IS GRATER THAN HAVING 1000 AFTER 9 YAERS

SO HAVING 607 NOW IS BETTER

d)

PRESENT PARKING FEE 74 AFTER 7 YAERS AT 6%

PARKING FEE AFTER 7 YEAR =74* (1+0.06)^7

=74 * 1.5 = 111

e)

AVG PRICE/CURRENT PRICE = 119000

PRICE INCREASING AT 10%

THERE FOR PRICE AFTER 7 YEARS= 119000 * (1+0.1)^7

=119000 * 1.95= 232050

f)

8500 + 270=8770 EACH YEAR FOR 10 YEARS, INTEREST RATE = 6%

THERE FOR PRESENT VALUE OF TOTAL AMOUNT = (TOTAL) SIGMA 1/(1.06)^10=7.36

THERE FOR WILLLING TO PAY = 8770 * 7.36 =64547.2

g)

450000 END OF EACH YEAR FOR 20 YEARS AT 7% INTEREST RATE

THERE FOR PRESENT VALUE OF THIS UNIFORM CASH FLOW IS

SIGMA PRESENE VALUE FOR 20 YEARS

=( TOTAL) SIGMA OF 1 /(1+0.07)^20

=10.6

THERE FOR PRESENT VALUE OF 450000 = 450000 * 10.6 =4770000

THANK YOU


Related Solutions

If you want to have $18,000 in four years, how much do you have to deposit today if
If you want to have $18,000 in four years, how much do you have to deposit today if your investment earns a rate of 3 percent per annum?
How much do you have to deposit today so that beginning 11 years from now you...
How much do you have to deposit today so that beginning 11 years from now you can withdraw ​$12,000 a year for the next 8 years​ (periods 11 through 18​) plus an additional amount of $24,000 in the last year​ (period 18​)? Assume an interest rate of 11 percent.
How much do you have to deposit today so that, beginning 11 years from now, you...
How much do you have to deposit today so that, beginning 11 years from now, you can withdraw $9,000 a year for the next 8 years (periods 11 through 18) plus an additional amount of $18,000 in the last year (period 18)? Assume an interest rate of 6%.
How much do you have to deposit today so that beginning 11 years from now you...
How much do you have to deposit today so that beginning 11 years from now you can withdraw ?$9,000 a year for the next 5 years? (periods 11 through 15?) plus an additional amount of $18,000 in the last year? (period 15?)? Assume an interest rate of 9 percent.
How much would you need to deposit in an account now in order to have $6000...
How much would you need to deposit in an account now in order to have $6000 in the account in 5 years? Assume the account earns 2% interest compounded daily. $ You decide to contribute to a mutual fund that averages 3.6% return per year. If you contribute $225 quarterly. Round all answers to the nearest cent as needed. a) How much will be in the account after 15 years? $ b) How much of this money did you deposit?...
How much would you need to deposit in an account each month in order to have...
How much would you need to deposit in an account each month in order to have $30,000 in the account in 6 years? Assume the account earns 8% annual interest compounded monthly.
How much would you have to invest today to receive: a. $100,000 in 6 years at...
How much would you have to invest today to receive: a. $100,000 in 6 years at 12 percent? b.$100,000 in 15 years at 12 percent? c.$10,000 at the end of each year for 25 years at 12 percent d.$75,000 at the end of each year for 25 years at 12 percent?
How much would you have to invest today to receive a. $15,000 in 8 years at...
How much would you have to invest today to receive a. $15,000 in 8 years at 6 percent? b. $20,000 in 12 years at 8 percent? c. $6,000 each year for 5 years at 10 percent? d. $50,000 each year for 20 years at 12 percent?
- If you wish to accumulate $240,000 in 13 years, how much must you deposit today...
- If you wish to accumulate $240,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 10%? Round to the nearest $0.01. - What will $117,000 grow to be in 18 years if it is invested in an account with an annual interest rate of 7.75%? Round to the nearest $0.01.
How much would you have to invest today to be able to withdraw $4,956 each month,...
How much would you have to invest today to be able to withdraw $4,956 each month, for 45 months, (starting next month), if your investments earn 4.14% APR (compounded monthly)?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT