EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 4, Problem 9PROB
Summary Introduction
The annual payment is $385 for the next eight years at 7% compounded annually.
Future value of an annuity due is the total future value of a series of periodic payments made at the beginning of each year at a given interest rate for a specified period.
Here,
The future value annuity is “
The periodic payments are “P”.
The interest rate is “r”.
The maturity period of time period is “n”.
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Suppose you invest $385 at the end of each of the next eight years. (a) If your opportunity cost rate is 7 % compounded annually, how much will your investment be worth after the last $385 payment is made? (b) What will be the ending amount if the payments are made at the beginning of each year?
Suppose you are going to invest $11,000 per year for six years. The appropriate interest rate is 9 percent. What is the future value if the payments are made on the last day of the year? What if the payments are made on the first day of the year?
a) $82,756.68; $90,204.78
b) $90,204.78; $82,756.68
c) $49,345.10; $53,786.16
d) $53,786.16; $49,345.10
Suppose you invest $2,000 today and receive $11,000 in five years.
a. What is the internal rate of return (IRR) of this opportunity?
b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has
the same IRR as the first one, what is the amount you will receive each year?
Chapter 4 Solutions
EBK CFIN
Ch. 4 - Prob. 1PROBCh. 4 - Prob. 2PROBCh. 4 - Prob. 3PROBCh. 4 - Prob. 4PROBCh. 4 - Prob. 5PROBCh. 4 - Prob. 6PROBCh. 4 - Prob. 7PROBCh. 4 - Prob. 8PROBCh. 4 - Prob. 9PROBCh. 4 - Prob. 10PROB
Ch. 4 - Prob. 11PROBCh. 4 - Prob. 12PROBCh. 4 - Prob. 13PROBCh. 4 - Prob. 14PROBCh. 4 - Prob. 15PROBCh. 4 - Prob. 16PROBCh. 4 - Prob. 17PROBCh. 4 - Prob. 18PROBCh. 4 - Prob. 19PROBCh. 4 - Prob. 20PROBCh. 4 - Prob. 21PROBCh. 4 - Prob. 22PROBCh. 4 - Prob. 23PROBCh. 4 - Prob. 24PROBCh. 4 - Prob. 25PROB
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