A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $250,000 a year for the next 20 years.The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer forthe defendant's insurance company argues for a discount rate of 9 percent.What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one separately. UseAppendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do notround intermediate calculations. Round your answers to 2 decimal places.)PV at 4% ratePV at 9% rateDifference$Present Value0.00Prev1 of 10MacBook AirNext > A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $250,000 a year for the next 20 years.The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer forthe defendant's insurance company argues for a discount rate of 9 percent.What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one separately. UseAppendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do notround intermediate calculations. Round your answers to 2 decimal places.)PV at 4% ratePV at 9% rateDifference$Present Value0.00Prev1 of 10MacBook AirNext >

The Present Value (PV) of an annuity is the current value of a series of equal payments made at…

A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $250,000 a year for the next 20 years. The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer for the defendant's insurance company argues for a discount rate of 9 percent. What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answers to 2 decimal places.) PV at 4% rate PV at 9% rate Difference $ Present Value 0.00

A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $250,000 a year for the next 20 years. The attorney for the plaintiff's estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer for the defendant's insurance company argues for a discount rate of 9 percent. What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answers to 2 decimal places.) PV at 4% rate PV at 9% rate Difference $ Present Value 0.00

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $38,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 5 percent, how much must the donor contribute today to fully fund the scholarship?
2. How much can you deduct for AGI for the following scenarios? Provide explanation for possible partial credit. (Remember that I only ask how much For AGI deduction can you claim in each scenario, I do not ask for the calculation of AGI) • Austin is a Graduate student. His gross income for 2020 is $25k from his Research assistant job. Austin pay $18k for his tuition in 2020 from his out-of-pocket money. • Anna is a non-active, non-managing, partner in AnnaBanana LLC. Her tax basis in the partnership is $10k. Her share of loss from the partnership is $12k. • Allison contribute $4k to her traditional IRA.
None
Bob buys a property that costs $1,000,000. The property is projected to generate NOI as follows: Year NOI 1 $100,000 2 $105,000 3 $110,000 Bob will own the property for two years. Bob will sell the property at the end of year 2 at a cap rate that is 250 basis points lower than the cap rate at which he bought the property. Assume Bob finances his purchase with a 50% LTV Fixed Rate IO loan at an annual rate of 5% with annual compounding and annual payments. What is Bob’s annualized IRR for the investment in question? A. 83.54% B. 52.38% C. 78.93% D. 79.71%
Your employer asks you to consult on the better approach to a decision. What should the corporation pay for an asset that will return them $150,000 at the end of year 1, then zero in year 2, then $400,000 in years 3 & 4, then zero in year 5, then $200,000 in years 6-10, assuming their discount rate is 3% (ignoring taxes) ?
Your friend needs money today and can pay you $400 in one year, $800 in 3 years, $200 in 5 years and $1,000 every year starting at the beginning of year 7 and ending at the beginning of year 10. How much would you be willing to lend him today if you both agree that 9% interest is fair.
Beverly and Kyle currently insure their cars with separate companies, paying $500 and $510 a year. If they insured both cars with the same company, they would save 15 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 6 percent? Use Exhibit 1-B. (Do not round intermediate calculations. Round time value factor to 3 decimal places and final answer to 2 decimal places.) Future value of annual savings
Hank purchased a car for $20,500 two years ago using a 4-year loan with an interest rate of 6.0 percent. He has decided that he would sell the car now if he could get a price that would pay off the balance of his loan. What’s the minimum price Hank would need to receive for his car? Calculate his monthly payments, then use those payments and the remaining time left to compute the present value (called balance) of the remaining loan. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Minimum Price = $_____.__
2. How much can you deduct for AGI for the following scenarios? Provide explanation for possible partial credit. (Remember that I only ask how much For AGI deduction can you claim in each scenario, I do not ask for the calculation of AGI) • Austin is a Graduate student. His gross income for 2020 is $25k from his Research assistant job. Austin pay $18k for his tuition in 2020 from his out-of-pocket money. • Anna is a non-active, non-managing, partner in AnnaBanana LLC. Her tax basis in the partnership is $10k. Her share of loss from the partnership is $12k. • Allison contribute $4k to her traditional IRA.
4
7. George, a financial planner, has determined that Dennis, his client, needs $2 million at age 66 to retire by using an annuity model based on a retirement income of $150,337.75 per year for 24 years to age 90. If the earnings rate was 10% and the inflation rate was 3%, what additional amount would be needed at age 66 to provide a capital preservation model solution?
Joe wants to own a home in the future. He asks you describe an advantages and disadvantage of a FRM versus an ARM. He then asks you to describe the advantages and disadvantages of a 15-year loan versus a 30-year loan. He also wants to know how the portion of the home payment that comprises interest changes over the years assuming he takes out an FRM. Is there anything he can do to reduce the total amount he’ll pay for the home? What else would be added to his monthly mortgage payment? What are three benefits of home ownership? What are three benefits of renting?

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