To critically think about: The reason why Company TC was ready to accept $24,099 at present in exchange of $100,000 in the future. Introduction: The time value of money implies that the cash in hand at present has a higher value than the cash receipt promised in the future. Hence, a person needs more money in the future to buy the same product at present.

Question

Want to see the full answer?

Answer 1

Question

Chapter 4, Problem 6CQ

Summary Introduction

To critically think about: The reason why Company TC was ready to accept $24,099 at present in exchange of $100,000 in the future.

Introduction:

The time value of money implies that the cash in hand at present has a higher value than the cash receipt promised in the future. Hence, a person needs more money in the future to buy the same product at present.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

In March 2018, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $5,000 in March 2053, but investors would receive nothing until then. Investors paid DMF $820 for each of these securities; so they gave up $820 in March 2018, for the promise of a $5,000 payment 35 years later. a. Assuming you purchased the bond for $820, what rate of return would you earn if you held the bond for 35 years until it matured with a value $5,000? (Do not round intermediate calculations and enter your answer as a percent, rounded to 2 decimal places, e.g., 32.16.) b. Suppose under the terms of the bond you could redeem the bond in 2028. DMF agreed to pay an annual interest rate of 1.3 percent until that date. How much would the bond be worth at that time? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. In 2028, instead of cashing in the bond…

In March 2020, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $1,000 in March 2045, but Investors would receive nothing until then. Investors pald DMF $440 for each of these securities; so they gave up $440 in March 2020, for the promise of a $1,000 payment 25 years later. a. Assuming you purchased the bond for $440, what rate of return would you earn if you held the bond for 25 years until it matured with a value $1,000? Note: Do not round Intermediate calculations and enter your answer as a percent, rounded to 2 decimal places, e.g., 32.16. b. Suppose under the terms of the bond you could redeem the bond in 2030. DMF agreed to pay an annual Interest rate of 1.5 percent until that date. How much would the bond be worth at that time? Note: Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. In 2030, instead of cashing in…

Hello, I have attached the full question below, but I just need help with a few parts, not the whole thing. I have also attached a screenshot of what I already have. I understand this question is complex, but can someone please help. On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $200,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% at June 30, 2021. The fair values of the…