uppose that a life insurance company has guaranteed a payment of $14 million to a pension fund 4.5 years from fund and can invest the entire premium for 4.5 years at an annual interest rate of 6.25%, how much will the life in $13.7 million $17.8 million $18.4 million $14.1 million

uppose that a life insurance company has guaranteed a payment of $14 million to a pension fund 4.5 years from fund and can invest the entire premium for 4.5 years at an annual interest rate of 6.25%, how much will the life in $13.7 million $17.8 million $18.4 million $14.1 million

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....

See similar textbooks

Related questions

Q: Use the following information for Ingersoll, Inc. Assume the tax rate is 21 percent. 2019 $18,798…

A: Cash flow StatementA cash flow statement provides a detailed picture of how cash is generated and…

Q: d Martha are twins, and just graduated from college. They plan to retire in 40 years. To that end,…

A: In order to answer the question, we must see the amount per month invested and for the period of…

Q: Required information [The following information applies to the questions displayed below. A pension…

A: Required:Portfolio Invested in Stock =?Portfolio invested in Bond Fund =?Expected Return of Optimal…

Q: Welch Corporation is planning an investment with the following characteristics (ignore income…

A: Internal rate of return.IRR means internal rate of return.It is the rate of return at which Present…

Q: A Corporation proposes to construct a new nuclear power plant to meet the increased demand for…

A: NPV means Net present value.NPV is a capital budgeting technique used for making investment…

Q: s a list of prices for zero-coupon bonds with different maturities and par value of $1,000. Suppose…

A: According to expectation theory short term interest should based on long term interest and both…

Q: Which one of the following has the highest effective annual rate? A. 6 percent compounded monthly.…

A: effective annual rate = - 1wherer = given interest raten = frequency of compounding

Q: Your grandmother has been putting $600 into a savings account on every birthday since your first…

A: The future value of an annuity can be calculated using the formula,

Q: Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000.…

A: 1.Calculation of YTM and YTC:Formula used:Since the YTM is above the YTC, the bond is likely to be…

Q: Annuity X pays $115 at each year-end for 3 years. Annuity Y pays $105 at the beginning of each year…

A: An annuity refers to a series of periodic payments made in exchange for a lump sum payment.…

Q: If you put up 23,000 today in exchange for a 6 percent, 10-year annuity, what will the annual cash…

A: Invested Amount = $ 23000Interest Rate = 6% Compounded AnnuallyPeriod = 10 YearsAnnual Cash Flow = ?

Q: Assume AMP Ltd just paid 100% fully franked dividend of $0.84 per share. The dividend is expected to…

A: We need to use constant growth model to calculate present value or current stock price.WhereD 1…

Q: The interest rate today is 5% p.a. compounded annually. You bought one share of the BBK stock for…

A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…

Q: tock price of ABC company at the end of 2018 was $85. In 2019 the quarter end stock prices are $94,…

A: Annual return = capital gain on stock + Dividend IncomeCapital gain on stock = Closing price of…

Q: Consider the cash flow diagram shown in Figure, which represents three different interest rates…

A: The PV of an investment refers to the combined value of the cash flows of the investment assuming…

Q: Question 3 The price history of stock ABC from year 0 to year 2 is as follows: Po P P₂ $50 $40 $60…

A: Stock Valuation is the process of estimating the intrinsic or fair value of a company's stock or…

Q: hat equal payments in 3 years and 5 years would replace payments of $42,500 and $92,500 in 7 years…

A: Here the present value of two payments to be made at the end of 7 years and 8 years should be equal…

Q: marillo National Bank offers you a 60-month, 0.139 APR (monthly compounding) auto loan. If you…

A: Loans are paid by monthly payments and these monthly payments carry the payment for interest and…

Q: You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for…

A: To protect yourself from a potential drop in land value, you want to purchase a financial instrument…

Q: Sandhill Company purchased, on January 1, 2025, as an available-for-sale security, $440,000 of the…

A: To prepare an amortization table for the Oak Corporation bonds using the effective-interest method,…

Q: You have $10,000 and will invest the money at an interest rate of .35 percent per month until the…

A: Given information,Present value: Future value: Interest rate: monthlyTo calculate,Number of periods

Q: You have recently adopted a child and are planning to save for her college education. You want to…

A: We need to use future value of ordinary annuity formula to calculate annual payment to achieve…

Q: Based on the information in financial statements for Emerson Corporation, the operating margin is…

A: Sales = s = $8,000,000Cost of Good Sold = cogs = $4,000,000Operating Expenses = oe = $2,900,000

Q: Thermal Systems, a company that specializes in odor control for wastewater treatment plants, made…

A: The deposit made now is $100,000Deposit every 6 months is $25,000The interest rate compounded…

Q: a) True b) False highe 19. What is the Present Value of a stream of quarterly cash flows of $55m…

A: Future value of the amount is the amount being deposited and amount of compounded interest…

Q: Use the following information relating to a float-adjusted market-capitalization-weighted Security %…

A: The market-capitalization index is an index where the component stocks are given their weightage…

Q: tax-free municipal bond provides a yield of 4.3%. What is the equivalent taxable bond given a 35%…

A: The bond are the type of investment that provides fixed return to the bond holders as a result of…

Q: Zaliea company produces hat with a variable cost of RM 5,000 for 500 pieces. Each unit was sold at…

A: For calculation of profit , we need to dedect veriable cost and fixed expences from sales .Profit =…

Q: Your financial advisor tells you that if you earn the historical rate of return on a certain mutual…

A: Time = t = 3 YearsPresent Value = pv = $20,000Future Value = fv = $23,152.50

Q: Calculate the operating cash flow. $6,090,830 $1,304,007 $3,433,908 $5,563,809 $1,982,604

A: The ability of a business to produce cash from its main operating operations is measured by…

Q: You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million…

A: Understanding the value of your business can provide valuable insights into its financial health,…

Q: ssume evco, inc., has a current stock price of $59 and will pay a $1.75 dividend in one year; its…

A: Dividend are paid by the company out of net income but payment of dividend reduces cash with company…

Q: Bond Dave has a 5 percent coupon rate, makes semiannual payments, a 8 percent YTM, and 8 years to…

A: Price of the bond is the PV of all future coupons and par value discounted at the YTM. We can…

Q: Investment X offers to pay you $6,100 per year for 9 years, whereas Investment Y offers to pay you…

A: Investment XCash Flow = cfx = $6100Time = tx = 9 YearsInvestment YCash Flow = cfy = $8400Time = ty =…

Q: Joint Cost Allocation—Market Value at Split-off Method Burn-on Inc. processes crude oil to jointly…

A: To allocate the $15,800 joint cost to each product using the market value at split-off method,…

Q: You just got a new part-time job and you need to buy a new car for your job. Suppose you have enough…

A: Variables in the question:PMT=$400Annual interest rate=6%Monthly interest rate=6%/12=0.5%N=5…

Q: Given the information below, compute the expected return and standard deviation for the two stocks:…

A: The expected return of a stock is calculated as the weighted average of probable returns of a stock…

Q: Suppose Blume Corp. is going public and, based on the bookbuilding process, decides it will be…

A: A Dutch auction is a type of auction where the auctioneer starts with a high asking price that is…

Q: You plan to deposit $3,000 at the end of each year for three years, starting with the first deposit…

A: When cash is accumulated in a bank account by making an annual contribution at the end of the year…

Q: You have been offered an investment opportunity in which you will deposit $3,000 today and you will…

A: The Future Value of an Annuity refers to the total value of a series of equal, periodic payments or…

Q: You can invest in a risk-free technology that requires an upfront payment of $1.04 million and will…

A: For perpetual cash flow, the ratio of the cash flow to the discount rate gives the present value of…

Q: What equal monthly investment is required over a 50-year period to achieve a balance of $1,900,000…

A: equal monthly investment" refers to a financial strategy where an individual or entity regularly…

Q: Consider a bond that pays 7% semiannually and has 12 years to maturity. The market requires an…

A: Compound = Semiannually = 2Coupon Rate = r = 7 / 2 = 3.5%Time = t = 12 * 2 = 24Interest Rate = r = 4…

Q: Donna enters into an investment contract that will guarantee her 4% per year if she deposits $3,500…

A: The future value of the investments can be calculated using the FV Function in excel.FV = (RATE,…

Q: You are investing in a retirement account and plan to deposit $5,000 per year into the account for…

A: Money has time value because money can be invested elsewhere and money can be earned so money today…

Q: Macy Pharmacy has a project which has the following cash flows. Year 0-$200,000 Year 1 = $50,000…

A: YearsCash flows0($200,000)1$50,0002$100,0003$150,0004$40,0005$25,000Required:Discounted Payback…

Q: Strike Jul 160 165 170 6.00 2.70 0.80 Calls E Jul Aug Oct 8.10 ( vado 11.10 5.25 8.10 3.25 6.00 0.75…

A: A butterfly spread is an options trading strategy that involves using three strike prices and two…

Q: You decide to save $75,000 at each year-end for three years. If the interest rate is 8% compounded…

A: The FV of an investment refers to the combined worth of the cash flows of the investment assuming…

Q: a) If the firm's dividend policy were based on a constant payout ratio of 40% for all years with…

A: If the firm's dividend policy were based on a constant payout ratio of 40% for all years with…

Q: Suppose that a 20-year government bond has a maturity value of $1000 and a coupon rate of 5%, with…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Concept explainers

Types of Insurance Contract

Insurance is a contract wherein an individual or entity gets financial protection from the insurance company for any damages or losses incurred. The individual or entity is called the insured, whereas the insurance company is called the insurer. The insured and the insurer enter a legal contract for a fixed term called the insurance term, and the contract is called an insurance policy.

Question

Suppose that a life insurance company has guaranteed a payment of $14 million to a pension fund 4.5 years from
fund and can invest the entire premium for 4.5 years at an annual interest rate of 6.25%, how much will the life in
$13.7 million
$17.8 million
$18.4 million
$14.1 million

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Analysis

VIEW

Step 2: Calculation of value of fund after 4.5years

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Consider a pension plan that will pay $10,000 once a year for a 5-year period (5 annual payments). The first payment will come in exactly 5 years (at the end of year 5) and the last payment in 9 years (at the end of year 9). a. What is the duration of the pension obligation? The current interest rate is 9% per year for all maturities. b. To generate the scheduled pension payments, the pension fund wants to invest the present value of the future payouts in bonds and match the duration of its obligation in part a). If the fund uses 5-year and 10-year zero-coupon bonds to construct its investment position, how much money (dollar amount) ought to be placed in each bond now? What should be the total face value (not current market value) of each zero coupon bond held? c. Right after the fund made its investment outlined in part b), market interest rates for all maturities dropped from 9% p.a.to 8% p.a. Show that the investment position constructed in part b) can still approximately fund the…
Assuming annual interest rates on comparable investments are 3,5%. What annual income could be expected by someone who had saved E140.000 in their personal pension fund and spent it all on a 25-year annuity? Select one: O a. £8,49496 O b. E8,347.58 O C. E9,478.09
d) If the pension fund you manage expects to have an inflow of $200 million 12 months from now what forward contract would you seek to enter into to lock in current interest rates? 30
A pension fund must pay out $1 million next year, $2 million the following year, and then $3 million the year after that. If the discount rate is 8%, what is the duration of this set of payments?
An investor is considering an annuity that pays $40,000 per year for four years. 1. Assuming the first $40,000 is paid in a years time given a discount rate of 4% what should the investor pay for this annuity today? 2. Assuming the first $40,000 is paid out immediately what should the investor pay today? (Asssume same discount rate). 3. If the investor pays $130,000 today and assuming the first paymentarrives in a years time, what would this investment’s internal rate of return be? (Asssume same discount rate). 4. What would the investor pay today if the first payment arrived in 5years time? (Asssume same discount rate). 5. If the investor invests $40,000 per year at the end of the next 4 years what would this be worth in 4 years time? (Asssume same discount rate).
What is the monthly payment for a home costing $475,000 with a 20% down payment and the balance financed for 30 years at 6.5%? (a) State the type. A. present valueB. future value C.ordinary annuityD.amortizationEsinking fund (b) Answer the question. (Round your answer to the nearest cent.)
What is the future value of $117,000 invested for 5 years at 14% compounded monthly? (a) State the type. present value future value amortization ordinary annuity sinking fund (b) Answer the question. (Round your answer to the nearest cent.)
You have a chance to buy an annuity that pays $25,000 at the beginning of each year for 10 years. You could earn 8.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? You are not required to show calculations but you must list the inputs used such as N, PV, FV, etc. O $346,484.41 O $177,976.57 O $164,033.70
How much would you be willing to spend for an annuity that pays $2,500 at the end of each year for three years, assuming you could earn 5.5% on other LIET similar investments? Select one: O a. $5,494 O b. $4,783 O c. $6,087 O d. $6,408 O e. $6,745 ہے
You want to establish an annuity that will pay you $14,000 per year for 22 years. If the prevailing rate in the economy is 3.75%, how much must you deposit today to establish this annuity. $173,669.70 $207,237.61 $238,429.37 O $215,000.02 88
Research annuities and calculate an annuity that pays you monthly (like a pension) for a 30 year period given starting capital of $500,000 and an average interest rate available on the money as a time deposit during the period of 3%.
Assume that you are offered an annuity that pays $100 at the end of each year for10 years. You could earn 8% on your money in other investments with equal risk.What is the most you should pay for the annuity? If the payments began immediately,how much would the annuity be worth? ($671.01, $724.69)