Loose Leaf for Corporate Finance Format: Loose-leaf
12th Edition
ISBN: 9781260139716
Author: Ross
Publisher: Mcgraw Hill Publishers
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 54QAP
Summary Introduction
To analyze: The better option amongst (a) and (b).
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
You have just won the lottery and will receive a lump sum payment of $23.49 million after taxes. Instead of immediately spending your money, you plan
to deposit all of the money into an account that will earn 5.53 percent. If you make equal annual withdrawals for the next 35 years, how much can you
withdraw each year starting exactly one year from now?
Multiple Choice
$1.582.896.36
$1,451,563.71
$1,531,835.19
5671142.86
$1,608.426.94
You just won a special lottery which will entitle you to an annual payment $45000 for 10 years, but the first payment won't start until 5 years later (i.e. 1st payment at the end of the 5th year). If you plan to immediately deposit every payment into an annuity product that gives you 5.62% APR with annual compounding, how much is your account balance at the end of the lottery payment plan (i.e. when you receive the last payment)?
You have just won the Multi-State Lottery. You have the option of receiving a check for $35,000,000 every year at the end of the next 22 years. The lottery commission also allows you the option of receiving a one-time payment of $387,143,417 when you turn in the winning ticket. What is the approximate interest rate that the lottery commission is using to determine the one-time payment? (Use spreadsheet software or a financial calculator to calculate your answer. Do not round any intermediary calculations, and round your final answer to the nearest percent, X%.)
Group of answer choices
7%
6%
8%
5%
Chapter 4 Solutions
Loose Leaf for Corporate Finance Format: Loose-leaf
Ch. 4 - Prob. 1CQCh. 4 - Prob. 2CQCh. 4 - Prob. 3CQCh. 4 - Prob. 4CQCh. 4 - Time Value On subsidized Stafford loans, a common...Ch. 4 - Prob. 6CQCh. 4 - Prob. 7CQCh. 4 - Prob. 8CQCh. 4 - Prob. 9CQCh. 4 - Prob. 10CQ
Ch. 4 - Simple Interest versus Compound Interest First...Ch. 4 - Prob. 2QAPCh. 4 - Prob. 3QAPCh. 4 - Calculating Interest Rates Solve for the unknown...Ch. 4 - Prob. 5QAPCh. 4 - Prob. 6QAPCh. 4 - Prob. 7QAPCh. 4 - Calculating Rates of Return Although appealing to...Ch. 4 - Prob. 9QAPCh. 4 - Prob. 10QAPCh. 4 - Present Value and Multiple Cash Flows Specter Co....Ch. 4 - Prob. 12QAPCh. 4 - Calculating Annuity Present Value An investment...Ch. 4 - Prob. 14QAPCh. 4 - Prob. 15QAPCh. 4 - Prob. 16QAPCh. 4 - Calculating EAR First National Bank charges 11.4...Ch. 4 - Prob. 18QAPCh. 4 - Calculating Number of Periods One of your...Ch. 4 - Prob. 20QAPCh. 4 - Prob. 21QAPCh. 4 - Simple Interest versus Compound Interest First...Ch. 4 - Calculating Annuities You are planning to save for...Ch. 4 - Prob. 24QAPCh. 4 - Prob. 25QAPCh. 4 - Prob. 26QAPCh. 4 - Prob. 27QAPCh. 4 - Prob. 28QAPCh. 4 - Prob. 29QAPCh. 4 - Prob. 30QAPCh. 4 - Calculating Interest Expense You receive a credit...Ch. 4 - Prob. 32QAPCh. 4 - Growing Annuity Southern California Publishing...Ch. 4 - Prob. 34QAPCh. 4 - Prob. 35QAPCh. 4 - Prob. 36QAPCh. 4 - Prob. 37QAPCh. 4 - Calculating Loan Payments You need a 30-year...Ch. 4 - Prob. 39QAPCh. 4 - Prob. 40QAPCh. 4 - Prob. 41QAPCh. 4 - Prob. 42QAPCh. 4 - Prob. 43QAPCh. 4 - Prob. 44QAPCh. 4 - Prob. 45QAPCh. 4 - Prob. 46QAPCh. 4 - Prob. 47QAPCh. 4 - Prob. 48QAPCh. 4 - Prob. 49QAPCh. 4 - Prob. 50QAPCh. 4 - Prob. 51QAPCh. 4 - Prob. 52QAPCh. 4 - Prob. 53QAPCh. 4 - Prob. 54QAPCh. 4 - Prob. 55QAPCh. 4 - Prob. 56QAPCh. 4 - Prob. 57QAPCh. 4 - Prob. 58QAPCh. 4 - Prob. 59QAPCh. 4 - Prob. 60QAPCh. 4 - Prob. 61QAPCh. 4 - Prob. 62QAPCh. 4 - Prob. 63QAPCh. 4 - Prob. 64QAPCh. 4 - Prob. 65QAPCh. 4 - Prob. 66QAPCh. 4 - Prob. 67QAPCh. 4 - Prob. 68QAPCh. 4 - Prob. 69QAPCh. 4 - Prob. 70QAPCh. 4 - Prob. 71QAPCh. 4 - Prob. 72QAPCh. 4 - Prob. 73QAPCh. 4 - Prob. 74QAPCh. 4 - Rule or 69.3 A corollary to the Rule of 72 is the...Ch. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MCCh. 4 - Prob. 5MC
Knowledge Booster
Similar questions
- Suppose you just won the state lottery, and you have a choice between receiving $2,679,000 today or a 20-year annuity of $261,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes. Group of answer choices 8.96% 7.41% 7.82% 8.55% 7.04%arrow_forwardYou like to buy lottery tickets every week. The lottery pays an insurancecompany that pays the winner an annuity. If you win a $60,000,000 lotteryand elect to take an annuity, you get $3,000,000 per year at the beginningof each year for the next 20 years.a. How much must the state pay the insurance company if money can earn3 percent?b. How much interest is earned on this lump-sum payment over the 20 years?c. If you take the cash rather than the annuity, the state pays you $30,000,000in one lump sum today. You must pay 40 percent of this in taxes. If you arecurrently working and invest this money at 6 percent, how much moneywill you have in a mutual fund at the end of 20 years?d. Are you better off with the annuity, or should you take the cash? Explain.arrow_forwardGeneral Accountingarrow_forward
- Suppose you just won the state lottery, and you have a choice between receiving $2,825,000 today or a 20-year annuity of $240,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.arrow_forwardPlease help me with the answerarrow_forwardSuppose you just won the state lottery, and you have two options: (1) receiving $2,550,000 now or (2) receiving a 20-year annuity with $250,000 payment at the end of each year. What rate of return is built into the annuity to make you indifferent with these two options? A) 7.12% B) 7.87% C) 8.26% D) 7.49% E) 8.67%arrow_forward
- You would like to have enough money saved to receive a $90,000 per year perpetuity after retirement. The annual interest rate is 8 percent. Required: How much would you need to have saved in your retirement fund to achieve this goal? a) Assume that the perpetuity payments start on the day of your retirement. b) Assume that the perpetuity payments start one year from the date of your retirement.arrow_forwardCan you please explain me how to solve this in excelarrow_forwardYou have just won the lottery and took a lump sum payout. After talking with a financial adviser you will make an lump sum deposit into an annuity that pays 3.3%, compounded semi-annual. If you will defer payments for 31 years and then receive payments at the end of every six months in the amount of $16,000.00 for 15 years. How much must you put into the annuity today to make this happen?You must deposit $ from your lottery winnings. (Round to 2 decimal places.)arrow_forward
- Assume you have won a lottery prize of $5,000, which works out great since you want to buy a new gaming PC that costs $5,500. You decide to save the lottery winnings for one year by purchasing a bank CD with one year until maturity. The interest rate on your deposit is 12% and inflation is expected to be 8% over the next year. You plan to work part-time to make up any shortfall in your savings covering the cost of the gaming PC one year from now. a. How much money will you have in your bank account at the end of one year? b. What is the real interest rate you expect to earn on your deposit over the next year? c. Will you have enough money from the savings to buy the PC next year? d. If your answer to c. is no, how many hours of work @ $15/hour will be required to make up the shortfall? Choose a submission type Submission type Upload, currently selectedUpload Select submission type StudioStudio More submission optionsMorearrow_forwardYour dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the$4,000,000 advertised jackpot. You can take annual payments of $160,000 at the end of the year for the next 25 years or $1,864,573 today. c. At what investment rate will the annuity stream of $160,000 be the same as the lump-sum payment of $1,864,573?arrow_forwardA local bank will pay you $135 a year for your lifetime if you deposit $3,000 in the bank today. If you plan to live forever, what interest rate is the bank paying? Note: Enter your answer as a percent rounded to 2 decimal places. Interest rate %arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning