
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Please write all your steps regarding each calculation. Also, refer to the formula sheet; if any formula is used, please label it. Anyways thank you.

Transcribed Image Text:Jack and Jill have a six
year consulting contract with an insurance company.
For the first Three years of the contract , the company guarantees them
$50000 in real dollars per yar plus $40000 in actual dollars per year. For years
and 5 of the contract, the company will pay them $75000 in real dollars per year.
And for year 6, they will receive $40000 in real dollars plus $75000 in actual dollars.
They estimate inflation to be 1.82% per year for the duration of the contract.
Their actual MARR is 12%.
Please indicate in actual dollars what is the total amount paid in year 3?
(а) $91837
(b) $92780
(c) $90000
(d) $87893
Please indicate in real dollars what is the total amount paid in year 6?
(a) $115000
(b) $107307
(c) $119572
(d) $109456
![List of Equations:
M
i̟
1+
M
i=|1+
СК
-1
i-
-1
(1+i)* –1
N
i
-
(A/F, i, N) =
(F/A, i, N) =
(1+i)* – 1
(1+i)* – 1
i(1+i)*
i(1+i)*
(P/A, i, N) :
(A/P, i,N) =
_(1+i)" – 1
-
(1 +i)™ – iN – 1
(1+i)" – iN –1
-
-
-
(P/G,i, N):
(A/G,i, N) =
%3D
N
(1+i)
i[(1 +i)^ – 1]
1-(1+ g) (1+ i)*
N
(P/A,g, i, N)=
if itg
i -g
N
(P/A,g i, N)=
(1+i)
if i=g
А
PW — СЕ
CR(i) — (Р — S)(А/Р, і, N) + iS
Bn = A(P/A,i,N-n)
In = (Bn-1)*i= A(P/A,i,N-n+1)*i
PPn = A(P/F,i,N-n+1)
P-S
Ds/(n) =
Р-S
BVs/(n)=P – n
N
BV 45(n) = P(1–d)"
Da, (n) = dP(1– d)
n-1
for n>1
CA, = rd{1-4)a-
CCA1 = P(d/2)
ССА
(1-d)"-2
for n>2
G=t * (Udisposal – S)
G=t-(Udisposal – P) – tcG+(S – P)
-
d
i'= i- f)
(1+f)
i =i' +f+i'*f
n-1
U
n
2
MARRA = MARRR +f+ MARRR f
*](https://content.bartleby.com/qna-images/question/783ce383-43f3-4332-85c6-260e48a9a7aa/9ce49e80-56ed-497a-b989-601be5a452b9/gz0m02j_thumbnail.jpeg)
Transcribed Image Text:List of Equations:
M
i̟
1+
M
i=|1+
СК
-1
i-
-1
(1+i)* –1
N
i
-
(A/F, i, N) =
(F/A, i, N) =
(1+i)* – 1
(1+i)* – 1
i(1+i)*
i(1+i)*
(P/A, i, N) :
(A/P, i,N) =
_(1+i)" – 1
-
(1 +i)™ – iN – 1
(1+i)" – iN –1
-
-
-
(P/G,i, N):
(A/G,i, N) =
%3D
N
(1+i)
i[(1 +i)^ – 1]
1-(1+ g) (1+ i)*
N
(P/A,g, i, N)=
if itg
i -g
N
(P/A,g i, N)=
(1+i)
if i=g
А
PW — СЕ
CR(i) — (Р — S)(А/Р, і, N) + iS
Bn = A(P/A,i,N-n)
In = (Bn-1)*i= A(P/A,i,N-n+1)*i
PPn = A(P/F,i,N-n+1)
P-S
Ds/(n) =
Р-S
BVs/(n)=P – n
N
BV 45(n) = P(1–d)"
Da, (n) = dP(1– d)
n-1
for n>1
CA, = rd{1-4)a-
CCA1 = P(d/2)
ССА
(1-d)"-2
for n>2
G=t * (Udisposal – S)
G=t-(Udisposal – P) – tcG+(S – P)
-
d
i'= i- f)
(1+f)
i =i' +f+i'*f
n-1
U
n
2
MARRA = MARRR +f+ MARRR f
*
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps with 2 images

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
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education

Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,

Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education