Problem 5-58 Calculating Annuity Values [LO 1] You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street-sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already decided in favor of the plaintiff. You are the foreperson of the jury and propose that the jury give the plaintiff an award to cover the following: (a) The present value of two years' back pay. The plaintiff's annual salary for the last two years would have been $64,000 and $67,000, respectively. (b) The present value of five years' future salary. You assume the salary will be $71,000 per year. (c) $235,000 for pain and suffering. (d) $30,000 for court costs. Assume the salary payments are equal amounts paid at the end of each month. If the interest rate you choose is an EAR of 10 percent, what is the size of the settlement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Award I

Problem 5-58 Calculating Annuity Values [LO 1] You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street-sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already decided in favor of the plaintiff. You are the foreperson of the jury and propose that the jury give the plaintiff an award to cover the following: (a) The present value of two years' back pay. The plaintiff's annual salary for the last two years would have been $64,000 and $67,000, respectively. (b) The present value of five years' future salary. You assume the salary will be $71,000 per year. (c) $235,000 for pain and suffering. (d) $30,000 for court costs. Assume the salary payments are equal amounts paid at the end of each month. If the interest rate you choose is an EAR of 10 percent, what is the size of the settlement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Award I

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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H4.
Problem 7-21 Auntie Kitty sells her home for $200,000, which is then invested to earn 4 percent annually. If her life expectancy is ten years, what is the maximum amount she can annually spend on a nursing home, doctors, and taxes? Use Appendix D to answer the question. Round your answer to the nearest dollar.The maximum amount that can be annually spend is $ . If the return were to double to 8 percent, will the amount she may spend each year more than double? Use Appendix D to answer the question. Round your answer to the nearest dollar.If the return were to double, the amount that can be annually spend will -Select-more than doubleless than doubledoubleItem 2 and will be equal to $ .
Question 2 (a) Show that the present value of annuity due is one period accumulated value of the present value of annuity immediate. (b) A church wants to provide a retirement plan for the senior pastor who is aged 55 now. The plan will provide the pastor with an annuity immediate of GHS7,000 every year for 15 years upon his retirement at the age of 65 years. The Church is funding this plan with an annuity-due of 10 years. If the rate of effective interest is 5%, what is the amount of instalment the church should pay?
2 Knowledge of the role of ethics in mathematical pursuits. Pam decides to have a small building constructed in her backyard and hires a contractor to do this for her. The cost of the project will be $24,000. Since this is a substantial amount, Pam and the contractor agree that she will pay the contractor monthly over the course of 3 years and that the contractor will charge interest of 4% APR. Pam pays exactly the monthly payment she is supposed to each month. For her very last payment, the contractor makes a mistake and sends her a bill for half of what it should be. A friend tells Pam that she knows a contractor who would have completed the job for much less than $24,000. C IC W (a) Find Pam's monthly payment. (b) Find the amount of the last bill the contractor sent. (c) Should Pam pay the bill as it was sent or pay the full amount as she had been over the past three years? S #3 X e C d $ 4 C r of % 5 f & t V 6 g hp & 7 b * 00 D O n 9 10 y h j k Sign out m ő 0 Dec 11 р alt 2
39. Problem 5.39 (Required Annuity Payments) 19 Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 4%. He currently has $235,000 seved, and he expects to earn 916 annually on his savings. How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round intermediate calculations. Round your answer to the nearest dollar $
Problem 7.5. Fair value of annuity payments Mrs. Lata aged 35 wanted to purchase an annuity from a life insurance company The annuity would pay her Rs 70,000 until she lives. The insurance company expected that she would live for 35 more years and it would be willing to pay 8 percent on the annuity. How much should the insurance company ask Mrs. Lata to pay for the annuity?
[Question 1-8] Jay's job is going great, and this past year he decided to work part- time, so that he could go to school full-time for his master's degree. Jay went to a business school, and tuition and fees were $25,000 for the year. He paid for his tuition and fees using a combination of savings, current income, scholarship, employer provided tuition assistance, and student loans. It is the end of the year and Jay is filing his tax return. His total income and benefits are as follows: Wages: $40,000 (as reported on his W2) Employer provided tuition assistance: $5,000 ⚫ Scholarship: $6,000 • . Student loan proceeds: $8,000 ⚫ Gift from his grandmother: $1,000 In addition to tuition, Jay had the following expenditures: . Student loan interest: $1,500 (as reported to Jay by his lender on Form 1098-E) • Books: $1,100 • Rent: $14,000 It is now time for Jay to complete his tax return. Jay is 28 years old and is in a relationship with Sandra, planning to get married next year. Calculate…
H5.
Question 26 Gavin Marriot, 36, is a successful dentist who owns a condominium with $250,000 owing on the mortgage. He has $10,000 in RRSP contribution room and $7,500 in other savings. His marginal tax rate is 46%. Gavin asks his Advisor how he can make the best use of his $7,500 in savings. Which of the following options is Gavin's Advisor most likely to recommend? Make a lump sum payment of $7,500 on his mortgage loan. Contribute $7,500 to his RRSP. Deposit $7,500 in a non-registered mutual fund. Contribute $3,750 to his RRSP and make a lump sum payment of $3,750 on his mortgage loan.
6
None
: "Home insurance and options" You own a house that costs $200,000 to build. You buy a $15,000 insurance policy to compensate you for damage to the house. The deductible is $25,000. (If your house suffers $4,000 damage from a storm, you pay for all repairs yourself. If the house suffers $45,000, in damage, you pay $25,000 and the insurance company pays the remaining $20,000.) (1) Graph the positions of the unhedged home, the home insurance and the hedged home position on the profit and loss diagram. In the diagram, specify the relevant values on the diagram. (2) To which trader type the insurance company belong? Explain your answer. a. Call buyer b. Call seller c. Put buyer d. Put seller

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