34. Growing perpetuities and annuities (S2.3) As winner of a breakfast cereal competition, you can choose one of the following prizes: a. $100,000 now. b. $180,000 at the end of five years. c. $11,400 a year forever. d. $19,000 for each of 10 years. e. $6,500 next year and increasing thereafter by 5% a year forever. If the interest rate is 12%, which is the most valuable prize?

34. Growing perpetuities and annuities (S2.3) As winner of a breakfast cereal competition, you can choose one of the following prizes: a. $100,000 now. b. $180,000 at the end of five years. c. $11,400 a year forever. d. $19,000 for each of 10 years. e. $6,500 next year and increasing thereafter by 5% a year forever. If the interest rate is 12%, which is the most valuable prize?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

AS winner of a breakfast cereal competition, you can choose one of the following prizes (1)$100.000 now 2) S200.000 at the end of five years: ( s12.000 in year 1, which grows at 2% a year aterwards forever (4) $20,000 for each of the 10 years if the interest rate is 12%, which is the most valuable prize? 4
K Suppose someone wants to accumulate $65,000 for a college fund over the next 15 years. Determine whether the following investment plans will allow the person to reach the goal. Assume the compounding and payment periods are the same. The person deposits $55 per month into an account with an APR of 7%. ... Will the person meet the goal? Select the correct choice below and fill in the answer box to complete your choice. (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) O A. No, because the amount that will be in the college fund, $ is less than the goal of $65,000. OB. Yes, because the amount that will be in the college fund, $ is more than the goal of $65,000. 3
Jasmine won a prize: the right to receive 36 payments of $100 per month with the first payment one month from today. If money is worth 6% compounded monthly, what is the economic value of these payments one year from today? a $3489.84 b $3600.00 c $2256.29 d $3287.10 e $3933.61
You are saving for a new house. You place $47,000 into an investment account at the end of each year for five years. How much will you have after five years if the account earns (a) 5%, (b) 7%, or (c) 9% compounded annually? Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1) a. b. C.. Annuity Annual Interest Payment Rate Compounded $ 47,000 47,000 47,000 5% 7% 9% Annually Annually Annually Period Invested 5 years 5 years 5 years Future Value of Annuity $ 59,985.23 65,919.93 72,315.33 4
Specific Instructions: Solve each problem NEATLY and SYSTEMATICALLY. Show your COMPLETE solutions and BOXX your final answer. Express your answers in 2 decimal places. TOPIC: ENGINEERING ECONOMICS Problem: Cathy wishes her daughter Aleah receive Php 100,000 ten years from now. What amount should she invest now if it will earn interest of 14 % compounded annually during the first two years and 10 % compounded monthly for remaining years.
7. You plan to save every year and accumulate $150,000 in 6 years to make the down payment for your house. To achieve your financial goal, you plan to make a deposit of $20,000 per year into a bank account paying 6% annual interest. The first deposit will be made a year from today. a. Draw a timeline to visualize the problem. b. Can you achieve your financial goal? (Show your work to answer this question) c. If not, what is the minimum deposit you need to make per year in order to achive your goal? 8. You are pursuing a Bachelor's in Finance at a business school, and you will need $20,000 per year for the next 4 years to cover your college expenses. That is, you plan to withdraw $20,000 at the end each of the next 4 years, starting one year from today. To support your college education, your parents decide to make a deposit today into a bank account paying an 8% annual interest. This deposit should be sufficient to cover the four $20,000 withdrawals you will make over the next 4 years.…
A) calculate the amount of money you will have after 25 years if you deposit $150 each month in an account that earns an annual rate of 7%. Round to the nearest cent, if necessary. Excel Formula: Your answer: B.) How much more did you save compared with just sticking the moey in a safe at home each month?
Direction: Solve what is being asked and show your complete and neat solution. (ROUND OF PV FACTORS TO 4 DECIMAL PLACES, ROUND OF FINAL ANSWER TO TWO DECIMAL PLACES. IN MCQs CHOOSE THE BEST ANSWER) If $100 is placed in an account that earns a nominal 4 percent, compounded quarterly, what will it be worth in 5 years?
4. Suppose you make an annual contribution of BD300 each year to a college education fund for a niece. She is 4 years old now, and you will start next year and make the last deposit when she is 18. The fund is a money market account earning 6.5%/year. What will it be worth immediately after the last deposit? You may also set up spreadsheet solution AGE Beginning Balance Ending Balance Deposit Interest
Suppose you receive $500 in graduation money. You decide to put it into an account paying 5%. If you deposit $175 into that same account every month for 7 years, how much money will you have at the end? $14,700.00 B $15,200.00 $16,195.49 $18,266.53 (E) $25,482.80
2. New parents wish to save for their newborn’s education and wish to have $55,000 at the end of 19 years. They make payments at the end of each month into a savings account that earns a rate of 7.6%/year compounded monthly. (a) Find the amount they need to deposit into this account each month in order to reach their goal. (Round answer to two decimal places) N = PV = PMT = FV = P/Y = C/Y = (b) How much interest would they earn over the life of the account? Use the rounded answer from part (a). (Round answer to two decimal places)
SUBJECT: ENGINEERING ECONOMICS (a) Identify the Given and the Unknown or what is being asked in the problem (b)Provide the formula to be used (c)Show the complete solution. The final answer is already provided. You plan to deposit P100 into a savings account at the end of each month for the next 5 years. a.)At 3% compounded monthly, how much will you have accumulated at the end of 5 years? b.)How much difference would it make if the payments were made at the beginning of the month rather than at the end? Answer: a.) F = P6,464.67, b.) F value difference = P196.63

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