In each case in exchange for paying a single premium

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Unformatted text preview: the defendants. The defendants have made an initial offer of $156,000 per year for 25 years. Anna plans to counteroffer at $255,000 per year for 25 years. Both the offer and the counteroffer have a present value of $2,000,000, the amount of the judgment. Both assume payments at the end of each year. a. What interest rate assumption have the defendants used in their offer (rounded to the nearest whole percent)? b. What interest rate assumption have Anna and her lawyer used in their counteroffer (rounded to the nearest whole percent)? c. Anna is willing to settle for an annuity that carries an interest rate assumption of 9%. What annual payment would be acceptable to her? LG6 4–52 Loan rates of interest John Flemming has been shopping for a loan to finance the purchase of a used car. He has found three possibilities that seem attractive and wishes to select the one with the lowest interest rate. The information 186 PART 2 Important Financial Concepts available with respect to each of the thr...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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