Ch 6 Problems

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

Info iconThis 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
Background image of page 1

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

View Full DocumentRight Arrow Icon
• 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? Irr(-42,{1O,1O,1O,10,5})
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/22/2011 for the course BMGT 340 taught by Professor White during the Fall '08 term at Maryland.

Page1 / 9

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online