Mercy receives the following cash flow from her rich uncle every year and she wants you to help her determine the present worth of the amount she receives for 5 years. Cash flow begins in year 2 and is as follows, $1.000, $2,000. $3.000, $4,000 respectively. Ifinterest is 12% what would you give Mercy and what will be uniform annual equivalent value at the end of each of the 5 years? Show your work
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Explain it early and correctly.
Not solve in excel works.
Definition of Present value of money:
The money having today on hand has more value than having in future.
Its also called as present discount value.
Step by step
Solved in 2 steps
- Arich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $4,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 3% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 15% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after the first payment is made? a. What is today's value of the bequest? Today's value of the bequest is $ (Round to the nearest doliar.)Abe Washington sold some property in Oregon and will receive $40,000 in 5 equal payments of $8,000 at the end of each year from today. What is the present value of these future payments at an interest rate of 9% compounded annually? Round answer to the nearest dollar. show in excel if possibleAn aunt gifts you with $12,000, but only after you invest it for one year. She givesyou two choices.1. Invest the entire sum at 4.2% compounded monthly.2. Invest $1000 at 7.1% each month in an annuity that pays every month.(a) What is the future value of the money invested with method 1?(b) How much interest is earned with method 1?(c) What is the future value of the money invested with method 2?(d) How much interest is earned with method 2?(e) Which method would you choose?
- A rich relative has bequeathed you a growing perpetuity. The first payment will occur in one year and will be $2,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 8% larger than the last payment. This pattern of payments will go on forever. If the interest rate is 15% per year, a. What is today's value of the bequest? b. What is the value of the bequest immediately after the first payment is made? a. What is today's value of the bequest? Today's value of the bequest is $ (Round to the nearest dollar.) b. What is the value of the bequest immediately after the first payment is made? The value of the bequest immediately after the first payment is made is $ (Round to the nearest dollar.)A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $3,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 5% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 15% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after the first payment is made?A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $5,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 5% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 9% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after the first payment is made?
- Sue's goal is to have $9000 in her savings account seven years from now. How much must she set aside at the end of each year at 5% compounded annually to meet this goal? Select one: a. $1105.38 b. $1285.71 c. $1555.38 d. $1089.66Your rich uncle bequests to you a continuous, constant income stream of $9000 per year for the next 10 years. The terms of the bequest require that this income stream be paid continuously into a specific savings account that will not be available to you for 10 years. This account earns 5% interest, compounded continuously. What is the present value of the bequest? How much money would the bequest be worth (including all interest accrued) after 10 years? You discover that a bank is offering 5.5% interest compounded continuously on a certificate of deposit (CD) that matures in 10 years. What is the cost of a CD at the above interest rate that would provide the same amount of money as the bequest after 10 years? Because the CD earns more interest than the savings account specified in the will, you feel that you are losing out on interest. So you ask the executor of the estate to use funds from the estate to buy a CD that will be worth the same as the bequeathed income stream in 15 years.…Your friend has a trust fund that will pay her the following amounts at the given interest rate for the given number of years. Calculate the current (present) value of your friend’s trust fund payments. (Click here to see present value and future value tables) Amount ofYearly Receipt Rate Time Current Value $6,400 10% 6 years $fill in the blank 1 $12,000 12% 10 years $fill in the blank 2 $17,500 5% 14 years $fill in the blank 3 $22,000 15% 15 years $fill in the blank 4
- A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $1,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 8% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 11% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after the first payment is made? a. What is today's value of the bequest? Today's value of the bequest is $ (Round to the nearest dollar.)Having received a large inheritance, Jing-mei's parents wish to establish a trust for her college education. Seven years from now they need an estimated $120,000. How much should they set aside in trust now if they invest the money at 7.6%/year compounded quarterly? Continuously? (Round your answers to the nearest cent.) quarterly $continuously $For her daughter's university education, Carla Hackl has invested an inheritance in fund paying 9.2% compounded quarterly. If ordinary annuity payments of $4750.00 per month are to be made out of the fund for 5 years and the annuity begins 7.75 years from now, how much was the inheritance? Blank # 1 Blank # 2
