(Related to Checkpoint 6.2) (Present value of annuity payments) The state lottery's million-dollar payout provides for $1 million to be paid in 25 installments of $40,000 per payment. The first $40,000 payment is made immediately, and the 24 remaining $40,000 payments occur at the end of each of the next 24 years. If 12 percent is the discount rate, what is the present value of this stream of cash flows? If 24 percent is the discount rate, what is the present value of the cash flows? a. If 12 percent is the discount rate, the present value of the annuity due is $ b. If 24 percent is the discount rate, the present value of the annuity due is $ II (Round to the nearest cent.) (Round to the nearest cent.)

(Related to Checkpoint 6.2) (Present value of annuity payments) The state lottery's million-dollar payout provides for $1 million to be paid in 25 installments of $40,000 per payment. The first $40,000 payment is made immediately, and the 24 remaining $40,000 payments occur at the end of each of the next 24 years. If 12 percent is the discount rate, what is the present value of this stream of cash flows? If 24 percent is the discount rate, what is the present value of the cash flows? a. If 12 percent is the discount rate, the present value of the annuity due is $ b. If 24 percent is the discount rate, the present value of the annuity due is $ II (Round to the nearest cent.) (Round to the nearest cent.)

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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fin320 (Related to Checkpoint 6.2) (Present value of annuity payments) The state lottery's million-dollar payout provides for $1.3 million to be paid in 20 installments of $65,000 per payment. The first $65,000 payment is made immediately, and the 19 remaining $65,000 payments occur at the end of each of the next 19years. If 7 percent is the discount rate, what is the present value of this stream of cash flows? If 14 percent is the discount rate, what is the present value of the cash flows? a. If 7percent is the discount rate, the present value of the annuity due is $ (Round to the nearest cent.) b.If 14 percent is the discount rate, the present value of the annuity due is $ (Round to the nearest cent.)
A lottery offers a $1,000,000 prize to be paid in 29 equal annual installments of $20,000 with a 30th final payment of $420,000. What is the total value of this annuity after the final payment if the current annual rate is 2%? (Round your answer to the nearest cent. Assume the final payment is made after the last installment payment, but before the balance of the account is compounded again.)$
A lottery offers a $1,000,000 prize to be paid in 20 equal installments of $50,000 at the end of each year. What is the future value of this annuity if the current annual rate is 6%? (Round your answer to the nearest cent.)
Suppose that you won $1,500,000 in the Illinois state lottery. It will be paid to you over 20 years at $75,000 per year. How much should the state invest at the time of the lottery so the annuity can make the required payments. Assume an interest rate of 6% compounded annually.
For the sinking fund, use Table 12-1 to calculate the amount (in $) of the periodic payments needed to amount to the financial objective (future value of the annuity). (Round your answer to the nearest cent.) Sinking Fund Payment $ 27658 x Payment Frequency every year Time Period (years) 14 Interest Nominal Rate (%) Compounded annually 8 Future Value (Objective) $750,000
blem #1: $10,000 is used to purchase an appropriate size annuity that has level annual payments for 18 years. The price of the annuity is based on an effective annual rate of 11.2%. As each payment is received, it is put into a fund that earns an effective annual rate of 7%. (a) Determine the accumulated value of the investment at the end of 18 years. (b) If the $10,000 were put into a fund that was to produce the same final value after 18 years, what annual effective rate would that fund have to offer?
The present value of an annuity using an effective annual discount rate of 12% is $40,043.69. This annuity consists of 9 annual payments with the first four payments being $8,000 each starting today. Determine the value of each of the next five payments, assuming they are of equal size. A) $8,009 B) $5,000 C) $2,721 D) None of the above
For the sinking fund, use Table 12-1 to calculate the amount (in $) of the periodic payments needed to amount to the financial objective (future value of the annuity). (Round your answer to the nearest cent.) Sinking Fund Payment Payment Frequency Time Periods (years) Nominal Rate (%) Interest Compounded Future Value (Objective) $______ every year 14 8 annually $350,000
Buckeye Healthcare Corp. is proposing to spend $186,725 on an eight-year project that has estimated net cash flows of $35,000 for each of the eight years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Compute the net present value, using a rate of return of 12%. Use the table of present value of an annuity of $1 presented above. If required, round your answers to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of annual net cash flows $ Less amount to be invested Net present value $ b. Based on the analysis prepared in part (a), is the…
A lottery offers you a choice of $1,000,000 per year for 30 years or a lump-sum payment. What lump-sum payment (rounded to the nearest dollar) would equal the annual payments if the current interest rate is 1.9% compounded annually? (a) State the type. A. amortization B. present value of an ordinary annuity C. future value of an ordinary annuity D.sinking fund E. none of these (b) Answer the question. (Round your answer to the nearest dollar.)
Recent sales of some real estate and record profits make it possible for a manufacturer to set aside $900,000 in a fund to be used for modernization and remodeling. How much can be withdrawn from this fund at the beginning of each half-year for the next 6 years if the fund earns 7.1%, compounded semiannually? (a) Decide whether the problem relates to an ordinary annuity or an annuity due. ordinary annuity O annuity due (b) Solve the problem. (Round your answer to the nearest cent.) $
A state lottery commission pays the winner of the “Million Dollar” lottery annual installments of $50000 each year for the next ten years. If the prevailing interest rate is 8%/year compounded continuously, will the winner get his million dollars? If no, what should be the size of annual installment for overall win be equal one million?

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