quiz%202%20solutions%202010%202%20summer%20c

quiz%202%20solutions%202010%202%20summer%20c - FNAN 301,...

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Unformatted text preview: FNAN 301, Summer C 2010, quiz 2, solutions Conceptual and quantitative: present value of a single cash flow and an annuity due 1. The Central Surfing Company just bought 500 wet suits from Sea Blanket Inc. Central Surfing has been offered the 3 possible payment options described in the table. If the discount rate is 17.4%, which one of the assertions is true? Option Terms of payment (amount and timing) from Central Surfing to Sea Blanket A A series of annual payments of $8,000, with the first payment due later today and the last payment due in 5 years from today B $32,000 today C $43,000 in 2 years A. Central Surfing should prefer option A more than option B and Central Surfing should prefer option C more than option B B. Central Surfing should prefer option A more than option B and Central Surfing should not prefer option C more than option B C. Central Surfing should not prefer option A more than option B and Central Surfing should prefer option C more than option B D. Central Surfing should not prefer option A more than option B and Central Surfing should not prefer option C more than option B 1. The Central Surfing Company just bought 500 wet suits from Sea Blanket Inc.. Central Surfing has been offered the 3 possible payment options described in the table. If the discount rate is 15.6%, which one of the assertions is true? Option Terms of payment (amount and timing) from Central Surfing to Sea Blanket A A series of annual payments of $9,000, with the first payment due later today and the last payment due in 5 years from today B $37,000 today C $51,000 in 2 years A. Central Surfing should prefer option A more than option B and Central Surfing should prefer option C more than option B B. Central Surfing should prefer option A more than option B and Central Surfing should not prefer option C more than option B C. Central Surfing should not prefer option A more than option B and Central Surfing should prefer option C more than option B D. Central Surfing should not prefer option A more than option B and Central Surfing should not prefer option C more than option B 1 FNAN 301, Summer C 2010, quiz 2, solutions FV annuity due plus extra payment at end 2. Lyndon has nothing in his retirement account. He plans to make regular savings contributions of $4,000 per year. His first regular contribution to his retirement account is expected today and his last regular contribution is expected in 4 years from today. Lyndon expects to earn 9.3 percent per year in his retirement account and he plans to retire in 4 years from today, immediately after making his last contribution. How much money does Lyndon expect to have in his account when he retires in 4 years from today?...
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This note was uploaded on 02/03/2011 for the course FINANCE 301 taught by Professor Murray during the Spring '09 term at George Mason.

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quiz%202%20solutions%202010%202%20summer%20c - FNAN 301,...

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