This preview shows page 1. Sign up to view the full content.
Unformatted text preview: made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not, What will the deficiency by? (c) Under the terms of his salary agreement, President Juan Rivera has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $75,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept? FV PV $40,000 x 10y x 8% $75,000x 10y x 8% $40000 x $75,000 x = $86,357 = $34739.51 Accept $40000 now is better option for Rivera....
View Full Document
- Spring '11