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

Author Question: What is the present value today of an ordinary annuity cash flow of 3,000 per year for forty years ... (Read 68 times)

cmoore54

  • Hero Member
  • *****
  • Posts: 568
What is the present value today of an ordinary annuity cash flow of 3,000 per year for forty years at an interest rate of 10.0 per year if the first cash flow is six years from today?
 
  A) 120,000.00
  B) 1,327,777.67
  C) 45,138.89
  D) 33,730.40

Question 2

Twelve years ago, you paid for the right to twelve 25,000 annual end-of-the-year cash flows. If discounting the cash flows at an annual rate of 8, what did you pay for these cash flows back then?
 
  A) 474,428.16
  B) 300,000.00
  C) 203,474.11
  D) 188,401.95



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

honnalora

  • Sr. Member
  • ****
  • Posts: 325
Answer to Question 1

Answer: D
Explanation: D) Although this problem is not directly addressed in the text, its intended effect is to reinforce the idea of present value. In this kind of problem, the student must find a present value in the future, and then discount that renamed future value back to the present value at time zero.
PV = PMT  / (1 + r)n = 3,000  / (1.06)5 = 33,730.40.

Answer to Question 2

Answer: D
Explanation: D)
PV = PMT  = 25,000  = 188,401.95.
MODE = END
INPUT 12 8 ? -25,000 0
KEY N I/Y PV PMT FV
CPT 188,401.95




cmoore54

  • Member
  • Posts: 568
Reply 2 on: Jul 10, 2018
Wow, this really help


juliaf

  • Member
  • Posts: 344
Reply 3 on: Yesterday
Great answer, keep it coming :)

 

Did you know?

Every 10 seconds, a person in the United States goes to the emergency room complaining of head pain. About 1.2 million visits are for acute migraine attacks.

Did you know?

The term bacteria was devised in the 19th century by German biologist Ferdinand Cohn. He based it on the Greek word "bakterion" meaning a small rod or staff. Cohn is considered to be the father of modern bacteriology.

Did you know?

A headache when you wake up in the morning is indicative of sinusitis. Other symptoms of sinusitis can include fever, weakness, tiredness, a cough that may be more severe at night, and a runny nose or nasal congestion.

Did you know?

The National Institutes of Health have supported research into acupuncture. This has shown that acupuncture significantly reduced pain associated with osteoarthritis of the knee, when used as a complement to conventional therapies.

Did you know?

Studies show that systolic blood pressure can be significantly lowered by taking statins. In fact, the higher the patient's baseline blood pressure, the greater the effect of statins on his or her blood pressure.

For a complete list of videos, visit our video library