The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively. Introduction : Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

Question

Want to see the full answer?

Answer 1

Question

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

An insurance company has liabilities of £7 million due in 10 years' time and £9 million due in 17 years' time. The assets of the company consist of two zero-coupon bonds, one paying £X million in 7 years' time and the other paying £Y million in 20 years' time. The current interest rate is 6% per annum effective. Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays in 7 year's time) such that the first two conditions for Redington's theory of immunisation are satisfied. Express your answer to THREE DECIMAL PLACES.

An individual is investing in a market where spot rates and forward rates apply. In this market, if at time t=0 he agrees to invest £5.3 for two years, he will receive £7.4 at time t=2 years. Alternatively, if at time t=0 he agrees to invest £5.3 at time t=1 for either one year or two years, he will receive £7.5 or £7.3 at times t=2 and t=3, respectively. Calculate the price per £5,000 nominal that the individual should pay for a fixed-interest bond bearing annual interest of 6.6% and is redeemable after 3 years at 110%. State your answer at 2 decimal places.

Answer 2

Question

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Answer 6

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

Answer 7

Chapter 5, Problem 5.21P

a.

Summary Introduction

To Determine: The future value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Introduction: Time value of money is the idea that the estimation of a dollar to be received in future is not as much as the estimation of a dollar presently. One reason is that the cash received presently can be contributed consequently for producing more cash. An annuity is a form of financial contract that are typically used for retirement plans by the insurance companies which assures guaranteed payment to the insurer. It is paid by the insurance company for a certain period of time or on lifetime basis.

Answer 8

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

Answer 9

b.

Summary Introduction

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

Answer 10

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Answer 11

c.

Summary Introduction

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

Answer 12

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

Answer 13

d.

Summary Introduction

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

Answer 14

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Answer 15

e.

Summary Introduction

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Answer 16

Expert Solution & Answer

Answer 17

Expert Solution & Answer

Answer 18

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 19

Ch. 5.1 - What is the difference between future value and...Ch. 5.1 - Define and differentiate among the three basic...Ch. 5.2 - Prob. 5.3RQ Ch. 5.2 - Prob. 5.4RQ Ch. 5.2 - Prob. 5.5RQ Ch. 5.2 - Prob. 5.6RQ Ch. 5.2 - Prob. 5.7RQ Ch. 5.3 - What is the difference between an ordinary annuity...Ch. 5.3 - What are the most efficient ways to calculate the...Ch. 5.3 - How can the formula for the future value of an...

To Determine: The annuity which has higher future value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

To Determine: The present value of two annuities at the end of year 10 if the annual interest rate is (1) 10% and (2) 20% respectively.

To Determine: The annuity which has higher present value at the end of 10 years with both (1) 10% and (2) 20% by using the findings from part a.

To Determine: Comparing and contrasting the differences using the findings from part b and d.

Want to see the full answer?

Chapter 5 Solutions