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 67 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
Great answer, keep it coming :)


nyrave

  • Member
  • Posts: 344
Reply 3 on: Yesterday
Gracias!

 

Did you know?

All patients with hyperparathyroidism will develop osteoporosis. The parathyroid glands maintain blood calcium within the normal range. All patients with this disease will continue to lose calcium from their bones every day, and there is no way to prevent the development of osteoporosis as a result.

Did you know?

Drug-induced pharmacodynamic effects manifested in older adults include drug-induced renal toxicity, which can be a major factor when these adults are experiencing other kidney problems.

Did you know?

Fatal fungal infections may be able to resist newer antifungal drugs. Globally, fungal infections are often fatal due to the lack of access to multiple antifungals, which may be required to be utilized in combination. Single antifungals may not be enough to stop a fungal infection from causing the death of a patient.

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?

Fewer than 10% of babies are born on their exact due dates, 50% are born within 1 week of the due date, and 90% are born within 2 weeks of the date.

For a complete list of videos, visit our video library