The Doesn’t Pay Life Insurance Co. is selling a perpetuity contract that promises to pay $10,000 annually forever with the first payment in exactly five years. Considering that Doesn’t Pay has a low rating from Fitch, you would require a 15% return. What is the most that you would be willing to pay for the contract?
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The Doesn’t Pay Life Insurance Co. is selling a perpetuity contract that promises to pay $10,000 annually forever with the first payment in exactly five years. Considering that Doesn’t Pay has a low rating from Fitch, you would require a 15% return. What is the most that you would be willing to pay for the contract?
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- The Doesn’t Pay Life Insurance Co. is selling a perpetuity contract that promises to pay$10,000 annually forever with the first payment in exactly one year. Considering thatDoesn’t Pay has a low rating from Fitch, you would require a 15% return. What is themost that you would be willing to pay for the contract? The Doesn’t Pay Life Insurance Co. is selling a perpetuity contract that promises to pay$10,000 annually forever with the first payment in exactly five years. Considering thatDoesn’t Pay has a low rating from Fitch, you would require a 15% return. What is themost that you would be willing to pay for the contract?The Doesn’t Pay Life Insurance Co. is selling a perpetuity contract that promises to pay $10,000 annually forever with the first payment in exactly one year. Considering that Doesn’t Pay has a low rating from Fitch, you would require a 15% return. What is the most that you would be willing to pay for the contract?You want to buy a house that costs $170,000. You have $17,000 for a down payment, but your credit is such that mortgage companies will not lend you the required $153,000. However, the realtor persuades the seller to take a $153,000 mortgage (called no more than $17,000 per year given a seller take-back mortgage) at a rate of 10%, provided the loan is paid off in full in 3 years. You expect to inherit $170,000 in 3 years, but right now all you have is $17,000, and you can afford to make payments your salary. (The loan would call for monthly payments, but assume end-of-year annual payments to simplify things.) a. If the loan was amortized over 3 years, how large would each annual payment be? Do not round Intermediate calculations. Round your answer to the nearest cent. $ Could you afford those payments? -Select- b. If the loan was amortized over 30 years, what would each payment be? Do not round Intermediate calculations. Round your answer to the nearest cent. $ Could you afford those…
- A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $108.6. The customer indicates that a 8.6 percent return is not very attractive. The broker responds by suggesting the customer borrow $80 for one year at 6.6 percent interest to help pay for the investment. a. What is the customer's expected return if she borrows the money? (Round your answer to 1 decimal place.) Customer's expected return %A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $106. The customer indicates that a 6 percent return is not very attractive. The broker responds by suggesting the customer borrow $90 for one year at 4 percent interest to help pay for the investment a. What is the customer's expected return if she borrows the money? Customer's expected return %3.You have the opportunity to make a one-time sale if you will give a new customer 30days to pay. You suspect there is a 15 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $289. Your variable cost on that item is $156 and your monthly interest rate is 1.75percent. Should you grant credit to this customer? Why or why not?
- You have a loan outstanding. It requires making three annual payments at the end of the next three years of $1000 each. Your bank has offered to restructure the loan so that instead of making the three payments as originally agreed, you will make only one final payment at the end of the loan in three years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent between the two forms of payment?Suppose you owe $15,000 on a credit card that carries an APR of 24%. Because the balance is so high, you choose to stop charging and pay off the card. You can afford to make only the minimum monthly payment, which is 5% of the balance. Then your balance after t months is given by B = 15,000(1.02 ✕ 0.95)t dollars. How many payments will you have to make to get the balance below $200? (Enter the smallest such number of payments as an integer.)You wish to buy a $10,000 dining room set. The furniture store offers you a three-year loan with an 11 percent APR. What are the monthly payments? How would the payment differ if you paid interest only? What would the consequences of such a decision be?
- A company wants to determine how much it should pay to purchase a particular ordinary annuity today. The annuity consists of cash flows of $ 8,000 at the end of each year for 5 years. The firm requires the annuity to provide a minimum return of 10%.Calculate the amount(Means you need to calculate PV of ordinry annuity). However anlyse how the answer will change if it a annuity due.Assume that you wish to trade in your old car and buy a new car. The new car has a list price of $31,500.00 and you have been offered a 6-year (72-month) car loan at a nominal annual interest rate of 3.84 percent (monthly compounding). Also assume that you want your monthly payments to be no more than $300 a month and will walk away from the deal if they are higher. Given this information, determine the minimum trade-in that the dealer must offer you on your old car in order to get you to buy the new car. O $10,107.86 O $10,926.03 O $11,592.97 $9,666.48 O $12,235.13You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender offers a 5.50% mortgage with no points, or an X% mortgage with 0.80 points. You plan on living in the house for exactly 31 months, paying only the required payment each month, and without refinancing your mortgage. What rate for the mortgage with points will make you indifferent between the two mortgages? Calculate a nominal rate, with monthly compounding. Use the 5.50% rate to discount cash flows between the two options. Note: all rates in the problem are nominal annual rates with monthly compounding. Recall, 1 point is 1% of the mortgage. Enter your answer in decimal format, to 4 decimal places. truncated. For example, if your answer is 5.518%, answer "0.0551".