TOPIC: ANNUITIES INSTRUCTION: SHOW COMPLETE SOLUTION WITH CORRESPONDING CASH FLOW DIAGRAM AND BOX THE FINAL ANSWER A refining company entered into a contract for raw materials with an agreement to pay P600,000 now and P150,000 per year beginning at the end of the 5th year. The contract was made for 10 years. At the end of the 3rd year, because of unexpected profits, the company requested that it be allowed to make a lump-sum payment in advance for the rest of the contract. Both parties agreed that 7% compounded annually was a fair interest rate. What was the amount of the lump sum?
TOPIC: ANNUITIES INSTRUCTION: SHOW COMPLETE SOLUTION WITH CORRESPONDING CASH FLOW DIAGRAM AND BOX THE FINAL ANSWER A refining company entered into a contract for raw materials with an agreement to pay P600,000 now and P150,000 per year beginning at the end of the 5th year. The contract was made for 10 years. At the end of the 3rd year, because of unexpected profits, the company requested that it be allowed to make a lump-sum payment in advance for the rest of the contract. Both parties agreed that 7% compounded annually was a fair interest rate. What was the amount of the lump sum?
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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Transcribed Image Text:TOPIC: ANNUITIES
INSTRUCTION: SHOW COMPLETE SOLUTION WITH CORRESPONDING CASH
FLOW DIAGRAM AND BOX THE FINAL ANSWER
A refining company entered into a contract for raw materials with an agreement to pay P600,000 now and P150,000
per year beginning at the end of the 5th year. The contract was made for 10 years. At the end of the 3rd year,
because of unexpected profits, the company requested that it be allowed to make a lump-sum payment in advance
for the rest of the contract. Both parties agreed that 7% compounded annually was a fair interest rate. What was the
amount of the lump sum?
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