Ch 6 Problems - Comprehensive Problem An investment will...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Comprehensive Problem • An investment will provide you with $100 at the end of each year for the next 10 years. What is the present value of that annuity if the discount rate is 8% annually? • What is the present value of the above if the payments are received at the beginning of each year? • If you deposit those payments into an account earning 8%, what will the future value be in 10 years? • What will the future value be if you open the account with $1,000 today, and then make the $100 deposits at the end of each year? 6C-59 Present value problems: End ofthe year: 10 N; 8 I/Y; 100 PMT; CPT PV = -671.01 Beginning of the year: PV = $671.00 X 1.08 = $724.69 Future value problems: 10 N; 8 I/Y; -100 PMT; CPT FV = 1,448.66 ION; 8 I/Y; -1,000 PV; -100 PMT; CPT FV = 3,607.58 5.59
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Practice Questions • What interest rate is implied with Manny Ramiriz's 5 year contract paying 10,10,10,10,5 million and a present value of $42 million? • Assuming this interest rate is correct, what is the value of the contract Ramirez wanted, with payouts of $25 and $20 rTlillion over two years?
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern