You will receive $12000 over the next 4 years. You can expect a 12% interest rate....

You will receive $12000 over the next 4 years. You can expect a 12% interest rate. You will receive $6000 in year 1 and your amount will decrease by $2000 each year. What is the present value of your money?

Solutions

Expert Solution

Summary

Basically the question deals with the concept of Time value of Money. Here , the amount received after 1 year is not as worth as it is recived today.Hence, to depict in numerical value, we use discounting the amount with relevant market interest rates.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

a) You invest $117 today and expect to receive $183 in 13 years. What interest rate...

a) You invest $117 today and expect to receive $183 in 13 years. What interest rate are you expecting to earn? (Put rate in 4 decimal places.) b) You invest $291 at the end of each year for 25 years in an account earning 6.9%. How much do you expect to be able to withdraw in 25 years? (Note this is an ordinary annuity.)

You expect to receive $1,000 in one year, and $4,000 in three years. If the interest...

You expect to receive $1,000 in one year, and $4,000 in three years. If the interest rate is 12% compounded monthly, what is the present value of all cash flows? Group of answer choices $3,739.98 $5,600.00 $6,739.71 $3,683.15

You are scheduled to receive annual payments of $3,600 for each of the next 12 years...

You are scheduled to receive annual payments of $3,600 for each of the next 12 years (you are going to receive the payments at the end of each year). The discount rate is 10 percent. What is the present value of these cash flows? Round the answer to two decimal places.

You will receive $100 from a zero-coupon savings bond in 4 years. The nominal interest rate...

You will receive $100 from a zero-coupon savings bond in 4 years. The nominal interest rate is 8.80%. a. What is the present value of the proceeds from the bond? b. If the inflation rate over the next few years is expected to be 3.80%, what will the real value of the $100 payoff be in terms of today’s dollars? c. What is the real interest rate?

Over the next few years economist expect that the next financial bubble might be the high...

Over the next few years economist expect that the next financial bubble might be the high debt of organizations bursting. A. Explain the difference between highly leveraged firms and low leveraged firms in regards to fixed and variable costs B. What are the benefits of being highly leveraged and the downfalls. C. Explain the benefits of being low leveraged firm and the potential downfalls.

The current term structure is flat. You expect interest rates to rise sharply over the next...

The current term structure is flat. You expect interest rates to rise sharply over the next years. Select the best strategy from the ones given below. (a) Buy bonds with a long duration. (b) Buy bonds with a lot of convexity. (c) Short-sell bonds with a long duration.

You borrowed $45,000 at 4% annual interest rate that you must repay over 3 years. The...

You borrowed $45,000 at 4% annual interest rate that you must repay over 3 years. The loan is amortized into three-equal end-of-year payments. (a) Calculate annual payment amount (b) Prepare a loan amortization schedule (c) If you make equal monthly payment for 36 months, calculate monthly payment amount and prepare a monthly loan amortization schedule (d) How much is total interest charge for 3 years, if you make annual payment? How much is total interest charge...

What interest rate is one earning over ten years if the investment initially is 100$ and you receive 20$ back at the end of ten years?

What interest rate is one earning over ten years if the investment initially is 100$ and you receive 20$ back at the end of ten years?A.6B.8C.7.2D.9.5

Tommy John is going to receive $740,000 in three years. The current market rate of interest is 4%.

Present Value of Amounts Due Tommy John is going to receive $740,000 in three years. The current market rate of interest is 4%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar $ 657,857 b. Why is the present value less than the $740,000 to be received in the future? The present value is less due to Inflation over the 3 years.

12/12 (Related to Checkpoint 9.6) (Inflation and interest rates) What would you expect the nominal rate...

12/12 (Related to Checkpoint 9.6) (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 4.2 percent and the expected inflation rate is 6.6 percent? The nominal rate of interest would be nothing%. (Round to two decimal places.)

Subjects