QuizChap5_2-28

QuizChap5_2-28 - Homework Manager Corporate Finance...

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Question 1: Score 0/1 Your response Correct response Calculating Annuity Values If you deposit $1,800 at 9.5 percent interest at the end of each of the next 19 years you will have $ (0%) in the account. If you make deposits for 38 years, you will have $ (0%) in the account at the end of 38 years. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Calculating Annuity Values If you deposit $1,800 at 9.5 percent interest at the end of each of the next 19 years you will have $ 87,324. with a tolerance of ± 0.1% in the account. If you make deposits for 38 years, you will h $ 577,106.39 with a tolerance of ± 0.1% in the account at the end of 38 years. (Round y answers to 2 decimal places. Omit the "$" sign in your response.) Total grade: 0.0×1/2 + 0.0×1/2 = 0% + 0% Feedback: Here we need to find the FVA. The equation to find the FVA is: FVA = C {[(1 + r) t – 1] / r } FVA for 19 years =$1,800[(1.095 19 – 1) / 0.095] FVA for 19 years = $87,324.22 FVA for 38 years =$1,800[(1.095 38 – 1) / 0.095] FVA for 38 years = $577,106.39 Question 2: Score 0/1 Your response Correct response Calculating Perpetuity Values Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $12,000 per year forever. If the required return on this investment is 6 percent, you will pay $ (0%) for the policy. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Calculating Perpetuity Values Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $12,000 year forever. If the required return on this investment is 6 percent, you will pay $ 200,000 with tolerance of ± 0.1% for the policy. (Round your answer to 2 decimal places. Omit the "$" sign your response.) Total grade: 0.0×1/1 = 0% Feedback: This cash flow is a perpetuity. To find the PV of a perpetuity, we use the equation: PV = C / r PV = $12,000 / 0.06 = $200,000 Question 3: Score 0/1 Your response Correct response Calculating Perpetuity Values Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $11,000 per year forever. The policy costs $187,000. The interest rate that would make this a fair deal is (0%) percent. (Input answer as a percent rounded to 2 decimal places, without the percent sign). Calculating Perpetuity Values Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $11,0 forever. The policy costs $187,000. The interest rate that would make this a fair deal is 5.88 with a tolerance of ± 1.0% percent. (Input answer as a percent rounded to 2 decimal places, without the percent sign). Total grade:
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This note was uploaded on 10/10/2010 for the course FIN 301 taught by Professor Andelin,stevenle during the Spring '07 term at Penn State.

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QuizChap5_2-28 - Homework Manager Corporate Finance...

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