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

Author Question: You have two contracts available to you: ONE is a perpetuity with cash flows of 500 per year, with ... (Read 43 times)

joblessjake

  • Hero Member
  • *****
  • Posts: 555
on: Jul 11, 2018
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
Reply #1 on: Jul 11, 2018
Answer to Question 1

A

Answer to Question 2

D


joblessjake

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

okolip

  • Member
  • Posts: 362
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Elderly adults are at greatest risk of stroke and myocardial infarction and have the most to gain from prophylaxis. Patients ages 60 to 80 years with blood pressures above 160/90 mm Hg should benefit from antihypertensive treatment.

Did you know?

Russia has the highest death rate from cardiovascular disease followed by the Ukraine, Romania, Hungary, and Poland.

Did you know?

An identified risk factor for osteoporosis is the intake of excessive amounts of vitamin A. Dietary intake of approximately double the recommended daily amount of vitamin A, by women, has been shown to reduce bone mineral density and increase the chances for hip fractures compared with women who consumed the recommended daily amount (or less) of vitamin A.

Did you know?

Essential fatty acids have been shown to be effective against ulcers, asthma, dental cavities, and skin disorders such as acne.

Did you know?

Never take aspirin without food because it is likely to irritate your stomach. Never give aspirin to children under age 12. Overdoses of aspirin have the potential to cause deafness.

Why Different Constellations Are Visible at Different Times of the Year Why Different Constellations Are Visible at Different Times of the Year
This chart illustrates the bottom up assumption about government. In this, attitudes, culture, and This chart illustrates the bottom up assumption about government. In this, attitudes, culture, and
Chinese workers on a railway in the far West. “Without them,” Leland Stanford, president of the Cent Chinese workers on a railway in the far West. “Without them,” Leland Stanford, president of the Cent
Average Number of Days per Year with Thunderstorms Average Number of Days per Year with Thunderstorms
Walking into new year kids drawing Walking into new year kids drawing
Video: Bone tissue types - compact and spongy

For a complete list of videos, visit our video library