Answered: What should the present value of a…

What should the present value of a savings account be to cover $30,000 of college expenses in 12.5 years, if the account pays 7.5% interest compounded quarterly?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

See similar textbooks

Related questions

Q: You find the following corporate bond quotes. To calculate the number of years until maturity,…

A: Bond price refers to the market value of a bond, which is influenced by factors such as interest…

Q: Suppose that you purchased a Ba rated $1000 annual coupon bond with an 8.9% coupon rate and a…

A: A bond is a fixed-income security that allows the investor access to the debt market through public…

Q: A 15 year $5000 par value bond has a 12% semiannual coupon and a nominal yield to maturity of…

A: Price of the bond refers to the current value of the bond. It is calculated as the present value of…

Q: There are two distinct discount rates at which a particular project will have a zero net present…

A: There are two distinct discount rates at which a particular project will have a zero net present…

Q: A 3.20 percent coupon municipal bond has 10 years left to maturity and has a price quote of 96.45.…

A: Par value$5,000.00Coupon rate3.20%Years to maturity10Price quote96.45%Compounding frequency2Years to…

Q: You have $51, 854.38 in a brokerage account, and you plan to deposit an additional $3,000 at the end…

A: The time value of money is a concept in finance that takes into account the effects of compounding…

Q: Adrian invested $14,000 in a savings bond that matures today for $41,270. How many years did the…

A: The objective of the question is to find out the number of years Adrian's investment took to grow…

Q: Portage Bay Enterprises has $4 million in excess cash, no debt, and is expected to have free cash…

A: Free cash flow is the operating cash flow available after the deduction of all expenses, debts and…

Q: Lena would like to have 25,706.30 in ordinary and annuity in five years the annuity has a 10.8%…

A: The objective of the question is to find out how much Lena should deposit every quarter in order to…

Q: 3. (a) Debt is 20% of assets for an organization. Total assets are$10,000. The tax rate is 40%. The…

A: (a) Debt at 20% of AssetsCalculate Debt and Equity:Debt = 20% * $10,000 = $2,000Equity = $10,000 -…

Q: Why isn't the share price of a long-lasting company like Johnson & Johnson extremely high to reflect…

A: Share prices of the long-lasting company can be affected by the following factors:Risk factors: The…

Q: The cost of a college education is currently $15,000 per year. The expected annual inflation rate…

A: To cover a $15,000 college education in 5 years with 3% annual inflation, you need to deposit…

Q: The following table presents selected 2020 annual income statement items and balance sheet items for…

A: The number of days it takes for a company to buy and sell the goods is called as operating cycle. It…

Q: Don't use chatgpt, Suppose a five-year, $1,000 bond with annual coupons has a price of $902.01 and a…

A: The objective of this question is to find the coupon rate of a bond given its price, yield to…

Q: Ward Corp. is expected to have a free cash flow of $1,200,000 next year. Cas flows are expected to…

A: Share price refers to the price per share prevailing in the market or investor needs to pay for…

Q: Your company is planning to construct a gas-fired power plant in the Philadelphia area. They are…

A: Net present valueThe value given to the asset or investments at present considering all the future…

Q: A stock has had the following year-end prices and dividends: Year Price $ 64.98 Dividend - 12345…

A: Arithmetic mean can be referred as the average return that can be expected from the return of the…

Q: What is the return on assets (ROA) of KwaZulu Limited if you use the DuPont model?

A: Return on Investment ( ROA ) is a financial ratio that measures a company's ability to generate…

Q: Your company currently has $1,000 par, 6% coupon bonds with 10 years to maturity and a price of…

A: The coupon rate of a bond is the fixed interest rate that the issuer pays to the bondholders. It is…

Q: You borrow $155,000; the annual loan payments are $12, 490.89 for 30 years. What interes rate are…

A: Borrowed amount = $155,000Annual loan payment = $12,490.89Number of years = 30 Years

Q: Con-yay & JZ Incorporated has an average collection period (accounts receivable/daily credit sales)…

A: Average collection period is one of efficiency ratio being used in business. This shows it would…

Q: Forecasting financing needs) Beason Manufacturing forecasts its sales next year to be $5.4 million…

A: Net income refers to an amount that is being earned by the company from its business after deducting…

Q: Water and Power Co. (W&P) currently has $575,000 in total assets and sales of $1,400,000. Half of…

A: "Since you have asked a question with sub-parts more than three, as per guidelines, the first three…

Q: You are going to deposit $3,500 in an account that pays .61 percent interest per quarter. How much…

A: The future value shows the value of the investment after a certain period at a specified rate. It is…

Q: Calculate the table factor, the finance charge, and the monthly payment (in $) for the loan by using…

A: To calculate the table factor, finance charge, and monthly payment for a loan with an amount…

Q: The December 31, 2021, balance sheet of Chen, Incorporated, showed long-term debt of $1,390,000,…

A: Operating cash flow is the amount that is computed by taking into consideration the tax effect on…

Q: Lena would like to have 25,706.30 in ordinary and annuity in five years the annuity has a 10.8%…

A: The answer is $ 986.23 She need to deposit $ 986.23 per quarterExplanation:We can use the formula…

Q: Problem 6-31 Credit Risk (LO5) Suppose that Casino Royale has issued bonds that mature in 1 year.…

A: Current yield = 28%Chance of default = 50%Maturity = 1 yearTo find: Expected yield on the bonds.

Q: Select the best answer for the question. 20. You want to invest money for three years in an account…

A: The objective of this question is to find out the present value of an investment that will grow to…

Q: You expect to start working three years from today, and to work for 30 years thereafter. In years 4…

A: Retirement account:The retirement account is also known in short as an IRA. It is a long-term…

Q: As a firm grows, it must support increases in revenue with new investments in assets. The…

A: Asset value: $300 millionNet income last year: $10 millionDividend paid last year: $1.55 million

Q: ou want to buy a $12,000 car. The company is offering a 3% interest rate for 48 months (4 years).…

Q: Vijay

A: The objective of the question is to find out the minimum equity (as a percentage of assets) that the…

Q: The balance on a credit card, that charges a 12% APR interest rate, over a 1 month period is given…

A: Finance Charge is the interest charged by credit card companies over an outstanding amount. Average…

Q: An investor uses £100,000 to buy 7-year bonds with a face value of £100. The bonds pay coupons…

A: Price of the bond refers to the present value of the future earnings and the maturity value at the…

Q: Suppose you are the money manager of a $4.28 million investment fund. The fund consists of four…

A: Market required rate of return = 12%Risk-free rate = 5%Total investment = $4.28 million or…

Q: Sparrow Products Industries is currently selling for $57.00. It just paid its annual dividend of…

A: The expected return of the stock is a measure of profitability from investment in the stock. The…

Q: Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional…

A: Proportion of preferred stock in capital structure = 15%Proportion of common stock in capital…

Q: Lena would like to have 25,706.30 in ordinary and annuity in five years the annuity has a 10.8%…

A: The objective of this question is to find out how much Lena should deposit per quarter in order to…

Q: Rex is planning to buy a house. His gross income is $72000 and his net income is $60000. He saved…

A: a) Gross Debt Service Ratio (GDSR) = (mortgage payment + property taxes + heating costs)/ gross…

Q: Compute the selling price of 8%, 10-year bonds with a par value of $340,000 and semiannual Interest…

A: Bond :— It is one of the type of securities that pays fixed periodic interest and face value amount…

Q: Eli Lilly bonds have an annual coupon rate of 5.55% and a par value of $1,000 and will mature in 17…

A: ParticularAmountFace Value (FV) $1,000.00Coupon Rate5.55%No. of years (NPER)17Interest (RATE)5%

Q: Year 0 1 2 3 4 5 Initial investment (3,500) Cash-in from operating 200 220 240 260 300 Cash-in from…

A: NPV is the most used method of project selection based on time value of money and it should be…

Q: A $100,000 mortgage is amortized over 20 years with monthly payments at an interest rate of 8%…

A: The objective of the question is to determine the new duration it would take to pay off the mortgage…

Q: Which of the following can be facilitated through your brokerage firm Providing investment…

A: The question is asking about the services that can be facilitated through a brokerage firm.…

Q: A bond, paying semi-annual coupons of $42, is purchased at a discount to yield j 2 = 9%. The book…

A: Bond valuation is a topic covered in this question, with an emphasis on bonds that were bought at a…

Q: D21 5 6 7 A B fx C D E F G H 8 Price per share 9 Shares outstanding 8,000,000 22.00 Face value of…

A: Before-tax cost of equity18.64%Before-tax cost of debt7.55%Equity weight82.40%Debt…

Q: What is the price of a 15% coupon rate bonds that matures in 5 years if market interest rate is 12%?…

A: The objective of this question is to calculate the price of a bond given its coupon rate, maturity…

Q: You are the loan department supervisor for a bank. This installment loan is being paid off early,…

A: An installment loan with a $4,600 principal balance is being paid off early after 33 payments out of…

Q: A speculator is considering the purchase of a 6-month Swiss franc call option on 50,000 francs with…

A: Currency = 50,000 FrancsStrike price = $1.0885/SFrPremium = $0.0075/SFrSpot price =…

Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

What should the present value of a savings account be to cover $30,000 of college expenses in 12.5 years, if the account pays 7.5% interest compounded quarterly?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Given Value for Calculation

VIEW

Step 2: Calculation of Present Value

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

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

You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?
If you were to make a deposit of $5,000 today in an investment account expected to pay 5% pa. compounded annually, how much will you have in your account at the end of year 5?
What is the future value, after 36 years, of $375 placed in a savings account today that pays interest quarterly, assuming an annual interest rate of 10%?
What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually?
Suppose you deposit $1,500.00 into and account 7.00 years from today into an account that earns 14.00%. How much will the account be worth 14.00 years from today?
What is the future value of $1,100 placed in a savings account for 4 years if the account pays 7% compounded quarterly?
How much do you have to invest today in a savings account that returns 6.5% interest, compunded annually, to get $25,300 at the end of 10 years?
If I deposited $7900 into a savings account that compounds daily at an annual rate of 5.1% how much would the balance be at 5.9 years?
You deposit $3375 today in a savings account that pays 6.25% interest, compounded annually. How much will your account be worth at the end of 24 years?
If you save $1298 per year for the next 17 years and earn 7.2% interest on your savings, how much will you expect to have at the end of 17 years? Assume deposits are made at the beginning of each year. Give your answer in dollars to the nearest one dollar.
What would be the value of a savings account started with $1,200, earning 3 percent (compounded annually) after 10 years?