H1.Account Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the followingscenarios (you get to choose):1. $8,750 per year at the end of each of the next eight years2. $49,950 (lump sum) now3. $98,150 (lump sum) eight years from now(Click the icon to view Present Value of $1 table.)of $1 table.)Read the requirements.(Click the icon to view Present Value of Ordinary AnnuityRequirement 1. Calculate the present value of each scenario using an 8% discount rate. Which scenario yields the highestpresent value? (Round the factors to three decimal places, XXXX. Round the present value to the nearest whole dollar.)Scenario 1, 8% discount rate, Present value =

Given in the question: Interest rate = 8% There are three scenarios which are given in the question…

Answered: Your grandfather would like to share…

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter14: Planning For Retirement

Section: Chapter Questions

Problem 8FPE

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Similar questions

Time value of money:- A part) Your relative has promised to remember you in her will. You will receive $1,000,000 thirty-nine years from today. If the annual interest rate is 11 percent, what is the promised inheritance worth today? B part) Twenty years ago, your grandmother opened a bank account in your name. She deposited $1,000 and has let all of the interest accumulate. You plan to retire thirty years from today. If the annual interest rate is (was) 9 percent throughout, how much money will be in the account when you retire?
Your grandmother left you an inheritance in the form of a trust. The trust agreement states that you are to receive R2 500 on the first day of each year, starting immediately and continuing for fifty years. What is the value of this inheritance today if the applicable discount rate is 6,20%? a. b. d. R66 811,30 R40 706,92 R39 942,42 R49 942,42
A
An inheritance provides you with a $52,000 per year payment for the next 40 years. A 6.00% discount rate, what is the present value of the inheritance? What is the gross amount of the payments?
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.)
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?
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 3% larger than the last payment. This pattern of payments will go on forever. If the interest rate is 10% 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.)
Consider an inheritance that pays the beneficiary an annuity of $400 that begins immediately (an annuity due) and then annually in year 1 through year 16 (for a total of 17 years) with one exception - the payment in year 11, and only 11, is not $400 but $0. Using an interest rate of 8%, determine the present value of this cash flow stream
(Related to The Business of Life: Saving for Your First House) (Future value) You are hoping to buy a house the future and recently received an inheritance of $18,000. You intend to use your inheritance as a down payment o your house. a. If you put your inheritance in an account that earns 8 percent interest compounded annually, how many years will be before your inheritance grows to $34,000? b. If you let your money grow for 10.25 years at 8 percent, how much will you have? c. How long will it take your money to grow to $34,000 if you move it into an account that pays 4 percent compounded annually? How long will it take your money to grow to $34,000 if you move it into an account that pays 13 percent? d. What does all this tell you about the relationship among interest rates, time, and future sums? it be before your inheritance grows to $34,000? 8.26 years (Round to one decimal place.) b. If you let your money grow for 10.25 years at 8 percent, how much will you have? (Round to the…
A couple thinking about retirement decide to put aside $12,500 each year in a savings plan that earns 7.50% interest. In 9 years they will receive a gift of $89,500 that also can be invested. a. How much money will they have accumulated 27 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Accumulated savings $ b. If their goal is to retire with $1,648,383 of savings, how much extra do they need to save every year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2. A friend who owns a perpetuity that promises to pay $2,000 at the end of each year, forever, comes to you and offers to give you the payments to be received from the 10th year through 30th year. How much would you pay for it when the interest rate is 10%?
K 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 12% 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)

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