Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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.

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
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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
*
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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 *
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