Present Value of Amounts Due Tommy John is going to receive $520,000 in three years. The current market rate of interest is 13%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1 b. Why is the present value less than the $520,000 to be received in the future? The present value is less due to     over the 3 years.

(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?

Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?

Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?

Present Value of Amounts Due Assume that you are going to receive $690,000 in 10 years. The current market rate of interest is 7%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar.$fill in the blank 1 b. Why is the present value less than the $690,000 to be received in the future?The present value is less due to   over the 10 years.

Present Value of Amounts Due Assume that you are going to receive $620,000 in 10 years. The current market rate of interest is 5.5%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. 6,599,39 X b. Why is the present value less than the $620,000 to be received in the future? The present value is less due to inflation X over the 10 years.

Present Value of Amounts Due Assume that you are going to receive $730,000 in 10 years. The current market rate of interest is 4.5%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $730,000 to be received in the future? The present value is less due to the compounding of interest V over the 10 years.

Present Value of Amounts Due Assume that you are going to receive $210,000 in 10 years. The current market rate of interest is 11%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1 1,378, 329 b. Why is the present value less than the $210,000 to be received in the future? The present value is less due to the compounding of interest over the 10 years.

Tommy John is going to receive $370,000 in three years. The current market rate of interest is 7%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $370,000 to be received in the future? The present value is less due to over the 3 years.

Present value of amounts due   Assume that you are going to receive $ 50,000 in 10 years. The current market rate of interest is 4%.   A.Using the present value of $ 1 table in Exhibit s, determine the present value of this amount compounded annually.   B.why is the present value less than the $50,000 to be received in the future?