1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and discuss the three possibilities of settling the last payment: (a) at the time of the last regular payment Outstanding AMT paid @ t=9 $ 297.26 (b) two years after the last regular payment Outstanding AMT paid @ t= 10 $ 315.37 (c) at the fractional time equal to the term of the annuity Outstanding AMT paid @ t= 9.10 Using compound interest (2.46) $ 299.07 2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever. Assuming the interest rate is 6% per annum, when can the first scholarship be offered? Scholarship can be offered in 20 years and 8 months. 3. [3] Calculate (a) (la) 710.05 (b) (Is)710.05 ANS: $22.02, $30.98

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 7MC: Using the information provided, what transaction represents the best application of the present...
icon
Related questions
Question
1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective
rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and
discuss the three possibilities of settling the last payment:
(a) at the time of the last regular payment
Outstanding AMT paid @ t=9 $
297.26
(b) two years after the last regular payment
Outstanding AMT paid @ t= 10 $
315.37
(c) at the fractional time equal to the term of the annuity
Outstanding AMT paid @ t= 9.10
Using compound interest (2.46)
$
299.07
2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever.
Assuming the interest rate is 6% per annum, when can the first scholarship be offered?
Scholarship can be offered in 20 years and 8 months.
3. [3] Calculate
(a) (la) 710.05
(b) (Is)710.05
ANS: $22.02, $30.98
Transcribed Image Text:1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and discuss the three possibilities of settling the last payment: (a) at the time of the last regular payment Outstanding AMT paid @ t=9 $ 297.26 (b) two years after the last regular payment Outstanding AMT paid @ t= 10 $ 315.37 (c) at the fractional time equal to the term of the annuity Outstanding AMT paid @ t= 9.10 Using compound interest (2.46) $ 299.07 2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever. Assuming the interest rate is 6% per annum, when can the first scholarship be offered? Scholarship can be offered in 20 years and 8 months. 3. [3] Calculate (a) (la) 710.05 (b) (Is)710.05 ANS: $22.02, $30.98
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:
9781285595047
Author:
Weil
Publisher:
Cengage
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Corporate Fin Focused Approach
Corporate Fin Focused Approach
Finance
ISBN:
9781285660516
Author:
EHRHARDT
Publisher:
Cengage