A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 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 8 percent. What is the difference between the present value of the settlement at 4 percent and 8 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. PV at 4% rate PV at 8% rate Difference Present Value
A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 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 8 percent. What is the difference between the present value of the settlement at 4 percent and 8 percent? Compute each one separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. PV at 4% rate PV at 8% rate Difference Present Value
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
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Transcribed Image Text:A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 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 8 percent.
What is the difference between the present value of the settlement at 4 percent and 8 percent? Compute each one separately. Use
Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
PV at 4% rate
PV at 8% rate
Difference
Present Value
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