(FV) In 1880, five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelly. One hundred and thirteen years later, the granddaughters of two of the trackers claimed that this reward had not been paid. If the interest rate over this period averaged about 4.5%, how much would the A$100 have accumulated to?
To determine: The accumulated income of $100 at 4.5%.
Answer to Problem 1SQ
The accumulated income of $100 at 4.5% is $14,459.09.
Explanation of Solution
Determine the accumulated income
Using a excel spreadsheet and excel function =FV, the accumulated income is determined as $14,459.09.
Excel Spreadsheet:
Therefore the accumulated income of $100 at 4.5% is $14,459.09.
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Chapter 2 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
- The problem describes a debt to be amortized. A man buys a house for $390,000. He makes a $150,000 down payment and amortizes the rest of the debt with semiannual payments over the next 9 years. The interest rate on the debt is 10%, compounded semiannually. (Round your answers to the nearest cent.) (a) Find the size of each payment.$ (b) Find the total amount paid over the life of the loan (including the down payment).$ (c) Find the total interest paid over the life of the loan.arrow_forwardA small construction company is considering the purchase of a used bulldozer for 100,000 SR. They don't have enough cash now to pay this amount and decided to pay equal amounts for the coming 7 years, starting from the end of the first year. How much to pay annually if the interest rate is 5%. a. 16455 O b. 13826 C. 14217 O d. 18341 e. 15781arrow_forwardThe problem describes a debt to be amortized. (Round your answers to the nearest cent.)A man buys a house for $360,000. He makes a $150,000 down payment and amortizes the rest of the purchase price with semiannual payments over the next thirteen years. The interest rate on the debt is 11%, compounded semiannually. (a) Find the size of each payment.$ (b) Find the total amount paid for the purchase.$ (c) Find the total interest paid over the life of the loan.$arrow_forward
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- 3. BMO administers a mortgage on someone's house. That mortgage obligates the homeowner to pay $50,000 each year to BMO (paid in regular, small installments) for the next 25 years. BMO would like to sell that mortgage to Scotiabank, so they need to approximate its value in present-day dollars. (a) ★★★☆ Assuming a future discounting rate of 10% (as in the last question), use an integral to approximate the value of the mortgage, in present-day dollars. (Hint: this is very similar to the last question.) Then, use a calculator to approximate the result to the nearest cent. (b) ★★★☆ Suppose BMO sells the mortgage to Scotiabank for the price you found in part (a). They put that money into an account earning a fixed interest rate, compounded continuously. No other money is put into the account, or taken out. What interest rate would the account have to earn, in order for the balance to be $1,250,000 after 25 years? ($1,250,000 is the amount of money BMO would have collected over the life of…arrow_forward1. A man was offered a landbank certificate with a face value of P 100,000 which is bearing an interest rate of 8% per year payable semiannually and due in 6 years. If he wants to earn 6% semiannually, how much must he pay the certificate? Ans. P 90614.92arrow_forwardDavid borrowed R911 012,00 to refurbish his holiday home. The loan requires monthly repayments over 12 years. When he borrowed the money, the interest rate was 12,4% per annum, compounded monthly, but five years later the bank increased the annual interest rate to 13,9%, in line with market rates. After five years, the present value of the loan is R682 081,77. With the new interest rate, his monthly payments (rounded to the nearest rand) will increase by: A. R558 B. R3 649 c. R12 745 D. R7 705arrow_forward
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