This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: The discount rate that should be used in the net present value calculation to compensate for risk is ... (Read 19 times)

Jkov05

  • Hero Member
  • *****
  • Posts: 556
on: Jul 10, 2018
The discount rate that should be used in the net present value calculation to compensate for risk is ________. (See Table 11.7)
 
  A) 6 percent
  B) 15 percent
  C) 18 percent
  D) 24 percent

Question 2

Aunt Tillie has deposited 33,000 today in an account which will earn 10 percent annually. She plans to leave the funds in this account for seven years earning interest.
 
  If the goal of this deposit is to cover a future obligation of 65,000, what recommendation would you make to Aunt Tillie?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

aadams68

  • Sr. Member
  • ****
  • Posts: 317
Reply #1 on: Jul 10, 2018
Answer to Question 1

D

Answer to Question 2

FV = 33,000(1.1)7 = 64,308
Aunt Tillie will only have 64,308 at the end of seven years under the stated arrangement. She must find an account with a higher interest rate or deposit a larger sum today.
The amount Aunt Tillie should invest today to receive 65,000 after 7 years, PV = 65,000 / (1.1)7 = 33,355.28


Jkov05

  • Member
  • Posts: 556
Reply 2 on: Jul 10, 2018
Gracias!

raili21

  • Member
  • Posts: 324
Reply 3 on: Yesterday
Excellent

« previous next »
 

Did you know?

For about 100 years, scientists thought that peptic ulcers were caused by stress, spicy food, and alcohol. Later, researchers added stomach acid to the list of causes and began treating ulcers with antacids. Now it is known that peptic ulcers are predominantly caused by Helicobacter pylori, a spiral-shaped bacterium that normally exist in the stomach.

Did you know?

According to animal studies, the typical American diet is damaging to the liver and may result in allergies, low energy, digestive problems, and a lack of ability to detoxify harmful substances.

Did you know?

As many as 28% of hospitalized patients requiring mechanical ventilators to help them breathe (for more than 48 hours) will develop ventilator-associated pneumonia. Current therapy involves intravenous antibiotics, but new antibiotics that can be inhaled (and more directly treat the infection) are being developed.

Did you know?

Bacteria have flourished on the earth for over three billion years. They were the first life forms on the planet.

Did you know?

According to the FDA, adverse drug events harmed or killed approximately 1,200,000 people in the United States in the year 2015.

A nurse adjusts the rate of a client’s IV. A nurse adjusts the rate of a client’s IV.
The Rate Law The Rate Law
Physical Fitness and Cancer Risk Physical Fitness and Cancer Risk
Risk Factor Categories for Atherosclerotic Cardiovascular Disease Risk Factor Categories for Atherosclerotic Cardiovascular Disease
How to solve rate problems leading to fractional equations (Question 2) How to solve rate problems leading to fractional equations (Question 2)
If a graph has the following x-intercepts, which value of x is the instantaneous rate of change ... If a graph has the following x-intercepts, which value of x is the instantaneous rate of change ...
Video: Non-polar compounds - insolubility

For a complete list of videos, visit our video library