This topic contains a solution. Click here to go to the answer

Author Question: You have two contracts available to you: ONE is a perpetuity with cash flows of 500 per year, with ... (Read 68 times)

joblessjake

  • Hero Member
  • *****
  • Posts: 555
You have two contracts available to you: ONE is a perpetuity with cash flows of 500 per year, with the first cash flow beginning today. TWO is a perpetuity with cash flows of 500 per year, with the first cash flow beginning one year from today.
 
  Which has a greater present value if the required rate of return is 5?
  A) Contract ONE is preferred because it has a present value that is 500 greater than contract TWO.
  B) Contract TWO is preferred because it has a present value that is 500 greater than contract ONE.
  C) Contract ONE is preferred because it has a present value that is 476.19 greater than contract TWO.
  D) Because these are perpetuities with equal required rates of return, they have equal value.

Question 2

Today is your 21st birthday and your bank account balance is 25,000. Your account is earning
  6.5 interest compounded monthly. How much will be in the account on your 50th birthday?
 
  A) 159,795 B) 162,183 C) 164,631 D) 163,823



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

kswal303

  • Sr. Member
  • ****
  • Posts: 316
Answer to Question 1

A

Answer to Question 2

D




joblessjake

  • Member
  • Posts: 555
Reply 2 on: Jul 11, 2018
Wow, this really help


jordangronback

  • Member
  • Posts: 339
Reply 3 on: Yesterday
Excellent

 

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

Did you know?

Your skin wrinkles if you stay in the bathtub a long time because the outermost layer of skin (which consists of dead keratin) swells when it absorbs water. It is tightly attached to the skin below it, so it compensates for the increased area by wrinkling. This happens to the hands and feet because they have the thickest layer of dead keratin cells.

Did you know?

According to the National Institute of Environmental Health Sciences, lung disease is the third leading killer in the United States, responsible for one in seven deaths. It is the leading cause of death among infants under the age of one year.

Did you know?

Inotropic therapy does not have a role in the treatment of most heart failure patients. These drugs can make patients feel and function better but usually do not lengthen the predicted length of their lives.

Did you know?

Cutaneous mucormycosis is a rare fungal infection that has been fatal in at least 29% of cases, and in as many as 83% of cases, depending on the patient's health prior to infection. It has occurred often after natural disasters such as tornados, and early treatment is essential.

For a complete list of videos, visit our video library