A company offers the following bonus package to its employees. What is the Net Presen Value of the package assuming an annual discount rate of 6% and annual compounding? Round to the nearest dollar. $70,000 upfront An annuity of $12,500 to be paid each year from year 1 through year 20 An additional $15,000 at the end of year 5 Please note that this question has a numeric format, so commas will be placed automatically in the answer (this will not result in a wrong answer).

A company offers the following bonus package to its employees. What is the Net Presen Value of the package assuming an annual discount rate of 6% and annual compounding? Round to the nearest dollar. $70,000 upfront An annuity of $12,500 to be paid each year from year 1 through year 20 An additional $15,000 at the end of year 5 Please note that this question has a numeric format, so commas will be placed automatically in the answer (this will not result in a wrong answer).

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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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

A company offers the following bonus package to its employees. What is the Net Present
Value of the package assuming an annual discount rate of 6% and annual
compounding? Round to the nearest dollar. $70,000 upfront An annuity of $12, 500 to
be paid each year from year 1 through year 20 An additional $15,000 at the end of year
5 Please note that this question has a numeric format, so commas will be placed
automatically in the answer (this will not result in a wrong answer).

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Two annuities are available for purchase that your client has identified. The first annuity pays $7,000 each six-month period over a 5-years period, at a nominal rate of 9% p.a. The annuity has an annual fee of $300, paid at the beginning of each year. The second annuity pays $1,000 each month, again over 5 years at a nominal rate of 10% p.a. and does not have an annual fee. If each of the annuities cost $50,000, identify which of the annuities you would recommend to your client.
Suppose a graduate student receives a non-subsidized student loan of $11,000 for each of the 4 years the student pursues a PhD. If the annual interest rate is 3% and the student has a 10-year repayment program, what are the student's monthly payments on the loans after graduation? (Round your answer to the nearest cent.)
A senior executive is offered a buyout package by his company that will pay him a monthly benefit for the next 20 years. Monthly benefits will remain constant within each of the 20 years. At the end of each 12− month period, the monthly benefits will be adjusted upwards to reflect the percentage increase in the CPI(an inflation rate). You are given:
Your employer is now offering a matching program for employees who participate in the corporate 401(k) plan. If you contribute 6% of your gross income to the account monthly, your employer will match your contribution. If you make $4000 per month, how much will be in your account after 40 years if you can average 7% APR. A. $5,647,090.80 B. $1,259,898.25 C. $23,465.46 D. $2,823,545.40
A downtown bank promises its potential employees a $ 8000 sign-on bonus, an additional bonus of $ 12000 two years from now, an additional bonus of $ 19000 four years from now, and an additional bonus of $ 23000 six years from now. Lavanya was hired today but only intends to work for this bank for three years. What is the present value of this bonus payment structure to her? (Assume that money is worth 8% p.a. compounded quarterly)
A company buys a machine for $18,000, which it agrees to pay for in five equal annual payments, beginning one year after the date of purchase, at an annual interest rate of 7%. Immediately after the second payment, the terms of the agreement are changed to allow the balance due to be paid off in a single payment the next year. What is the final single payment? Solution: 1. Draw the CFD by yourself; 2. First, calculate annual payment amount for the first 2 years: O A= + 7%, • )=18000x =$ o The final payment is the • worth of the : unpaid payments. 3. Second, Calculate the single payment amount due at the end of the 3rd year: F=S
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Assume that you will have a 10-year, $20,000 loan to repay when you graduate from college next month. The loan, plus 10 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $3,255 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $3,255). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.) Interest Period Date of Graduation Year 1 Year 2 Year 3 Annual Payment Annual Interest Expense @10% a. Actual net-of-tax interest cost b. Effective interest rate Reduction in Unpaid Balance Unpaid Balance One of the advantages of borrowing is that interest is deductible for income tax purposes. a.…
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