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- 13. Moreon the time value of money The time value of money concept can be applied in various situations and is a fundamental concept underlying other financial concepts. Consider the following example of the application of this concept. Charles is a divorce attorney who practices law in New York City. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues for the ADLA are $550 per year and must be paid at the beginning of each year. For instance, membership dues for the first year are paid today, and dues for the second year are payable one year from today. However, the ADLA also has an option for members to buy a lifetime membership today for $5,000 and never have to pay annual membership dues. Obviously, the lifetime membership isn’t a good deal if you only remain a member for a couple of years, but if you remain a member for 40 years, it’s a great deal. Suppose that the appropriate annual…After having not gone anywhere over the past few years due to COVID, you would like to begin planning your next family vacation. You plan on taking your family to the Walt Disney World for a magical vacation in two years. Your hope is that, by then, COVID-related restrictions will have been eased. You are also hoping that the new Guardians of the Galaxy attraction will be completed by then. Starting today, you will begin making quarterly deposits of $600 into a savings account that pays interest quarterly (every 3 months). The annual interest rate earned in this account is 4% APR (1.00% quarterly), If you make your first deposit today and continue making quarterly deposits into the account for the next two years, how much money will you have saved for your vacation after you make your final payment at the end of the second year (9 total deposits)? The amount of money saved in the account at the end of the 2nd year is closest to which of the following? O A. $5,092 O B. $4,591 O C.…Tony Matheson plans to graduate from college in May 2021 after spending four years earning a degree in sports and recreation management. Since beginning T-ball at age five, he’s been actively involved in sports and enjoys the outdoors. Each summer growing up, he and his father would spend two weeks at a father/son outdoor camp. These fond memories are part of the reason he chose his major. He wants to remain involved in these outdoor activities and provide others with the same adventures he was able to share with his dad. He decides to start an outdoor adventure company. However, he’s not sure he has the business background necessary to do this. This is where Suzie Ramos can help. Suzie also plans to graduate in May 2021 with a major in business. Suzie and Tony first met their sophomore year and have been friends ever since as they share a strong interest in sports and outdoor activities. They decide to name their company Great Adventures. They will provide clinics for a variety of…
- 4. Turton 4th, Prob. 9-18. You want to begin an investment plan to save for your daughter's college education. Because you believe that your newly born daughter will be a genius (just like you!), you are assuming the educational cost will be that of an Ivy League School. You plan to put money into an investment account, at the end of each year, for the next 18 years. You believe that you will need about $60,000 per year, each year, 19 through 22 years from now. a. Draw a discrete cash flow diagram for this situation. b. How much would you have to invest each year to pay for college and have a zero balance at the end of year 22? The effective annual interest rate of your investment is 8%. c. What interest rate would be needed if you could invest only $5000/yr?Please read the scenario below and asnwer the questions that follows. Please show clear working and answers thank you. Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation successfully. She is a fresh finance graduate and is excited to invest some money in the capital market, for which she intends to use the gifted sum of $50,000. However, instead of committing this money to the market immediately, she decides to wait for some time, work in the field and acquire some experience before proceeding with her intended investment. She thus contemplates an extremely conservative investment in a portfolio of stocks and bonds, at the start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with the bank which promises an interest rate of 6% per annum. She will require a return of at least 9% on her stock investments and 4% on bond investments. Stephanie would have to pay 25% taxes on any interest income. Dividends will be…Starting next year, your daughter Hessa will need $50,000 annually for 5 years to complete her Master’s degree in a field of dentistry, called orthodontics, at the New York University, USA. Therefore, exactly one year from today, Hessa will need to make her first withdrawal of $50,000. Since you like to plan your family’s finances well in advance, you have decided to deposit a specific amount today in a local HSBC branch, from which Hessa can receive the needed $50,000 every year. This bank account will be paying a 10% annual interest rate for the duration of your investment there. Using the relevant time value of money concepts, determine how large must this deposit has to be. Calculate how much money Hessa will have in her HSBC bank account right BEFORE she makes the first withdrawal. Estimate how much money Hessa will have in her HSBC bank account right AFTER she makes the first withdrawal. Compute how much money Hessa will have in her HSBC bank account right BEFORE she…
- Divide your class into groups of three to four persons and spend 10 minutes on the following situation. Report and discuss your results with your classmates. A startup company will require capital investment of $350,000 in 2018 and another $340,000 in 2019. Revenue in 2018 is estimated to be $50,000 and $60,000 in 2019. After 2019, the revenue is expected to be $175,000 per year for a total of four years. After four years, the firmwill be sold for $1,000,000.What is the simple payback period for this business venture? Draw a cash-flow diagram.Show all of your work and put a box around your final answer. Include a therefore statement. Sam would like to visit her family in New Zealand. She figures she will need at least $9,000 for the plane ticket and expenses. She goes to a local bank in Calgary to open a savings account. After some thought she decides to invest $7,500 into an account that pays interest at 8% per annum compounded quarterly. How many compounding periods will it take her for her to reach her goal? Round to the nearest number of compounding periods that makes sense. (Hint: Use the formula A = P(1 + i)" where A represents the final amount, P represents the initial principal, i represents the interest rate per compounding period, and n represents the number of compounding periods)4
- If you go to an Islamic bank and ask for financing for following purposes, which financial product Islamic bank will most likely to use and why? 10 years financing to start a new project 5 years financing to construct a house on your land 3 years financing for a heavy duty generator 6 months financing for IPhone 12 we have to mention a particular islamic financial product for each of the above scenrios.You plan to be a doting parent for your three adorable tots (you love to plan ahead). You plan to set up a fund to pay for their law school educations immediatley after their undergraduate studies. The fund will be set up to pay each little one $175,000 for the first year of school, then increase 4% per year through graduation. Assume the kids graduate after 3 years of law school. The oldest tot begins law school in 18 years; the second one starts two years later, and the last little one starts one year after the second. You have set aside $75,000 thus far. You earn 8% on your investments. Next year's salary is expected to be $220,000. What fraction of your salary must you set aside if you get raises of 2% per year to make your vision a reality? You start your savings based on income one year from now and you make your last payment on the first child's first day at law school.