Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter B, Problem 2QS
To determine
Identify the annual interest rate for the investment made.
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Consider an investment which pays $3,000 at the end of year 1, year 2, and year 3. In year4, the investment will pay $4,000 and this payment will grow by 2% each year forever. If theappropriate interest rate is 9%, what is this investment worth today? (Show Using BA II Plus or By Hand)
You have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.a) Explain the time value of money principleb) Identify the underlying assumption of the time value of money principlec) Draw a graph that illustrates the relationship between interest rates and the present value of RM 1,000.00 to be received in one year.d) Suggest how you can minimize the amount of cash you must invest in order to reach your retirement goal.e) Compute the amount you will have at the end of the 45 years.f) Calculate the amount you would have if the investment plan pays 10 percent for the first 15 years and 6 percent per year for the next 30 years.
Ken Francis is offered the possibility of investing $2,745 today; in return, he would receive $10,000 after 15 years. What is the annual rate of interest for this investment?
Chapter B Solutions
Principles of Financial Accounting.
Ch. B - Prob. 1QSCh. B - Prob. 2QSCh. B - Prob. 3QSCh. B - Prob. 4QSCh. B - Prob. 5QSCh. B - Beene Distributing is considering a project that...Ch. B - Prob. 7QSCh. B - Prob. 1ECh. B - Prob. 2ECh. B - Prob. 3E
Ch. B - Prob. 4ECh. B - Prob. 5ECh. B - Prob. 6ECh. B - Prob. 7ECh. B - Number of periods of an investment Keith Riggins...Ch. B - Prob. 9ECh. B - Prob. 10ECh. B - Prob. 11ECh. B - Prob. 12ECh. B - Prob. 13ECh. B - Prob. 14ECh. B - Prob. 15ECh. B - Future value of an annuity Kelly Malone plans to...Ch. B - Prob. 17ECh. B - Practical applications of the time value of money...Ch. B - Using present and future value tables For each of...
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- 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 annuityarrow_forwardIf you invest $15,000 today, how much will you have in (for further instructions on future value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%arrow_forwardChris offers you an investmet where if ou investment where if you invest $1,000 today, he'll return you $1,200 in 2 years. What is the annual rate of return of this investment? Choose the closest. a) 10.5% b) 9.0% c) 10.0% d) 9.5%arrow_forward
- Answer followings (a) Suppose you wish to borrow $60,000 at an annually compounded interest rate of 16% for a period of 14 years. What would be the annual repayment? (b) You wish to invest $30,000 today in order to save $60,000 for a deposit to buy a house in several years’ time.How many years must you invest in order to have a future value of $60,000 if the interest rate is 12%? (c) What is the effective annual rate of a savings account with an annual interest rate of 5.9% compounded quarterly?arrow_forwardYou have RM 5,000.00 you want to invest for the next 45 years until retirement. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years. 1) Draw a graph that illustrates the relationship between interest rates and the present value of RM1,000.00 to be received in one year.2) Compute the amount you will have at the end of the 45 years.3) Calculate the amount you would have if the investment plan pays 10 percent for the first 15 years and 6 percent per year for the next 30 years.arrow_forwardAn investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If the rate of interest earned on the investment is 8%, what is the present value of this investment? What is its future value? How do you solve this with excel?arrow_forward
- Future value of an ordinary annuity: Robert Hobbes plans to invest $25,000 a year at the end of each year for the next seven years in an investment that will pay him a rate of return of 11.4 percent. How much money will Robert have at the end of seven years? Could you please show the formula that would be used if using excel is for either FV or however it is set up. Thanksarrow_forwardBill Padley expects to invest $10,000 for 25 years, after which he wants to receive $108,347. What rate of interest must Padley earn? (PV of $1. FV of $1. PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places. Future Value Present Value Table Factor Interest Rate %6arrow_forwardBill Padley expects to Invest $19,000 for 2 years, after which he wants to receive $22,990.00. What rate of Interest must Padley earn? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Future Value Present Value Table Factor Interest Rate %6arrow_forward
- You have just made your first $5,500 contribution to your retirement account. Assuming you earn a return of 10 percent per year and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 10 years before contributing? (Does this suggest an investment strategy?) Input area: Present value Interest rate Number of years Number of years (Use cells A6 to 89 from the given information to complete this question. Your answer should be a positive value.) Output area: $5,500 10% 45 35 Future value Future value $arrow_forwardK You have just received a windfall from an investment you made in a friend's business. She will be paying you $41,444 at the end of this year, $82,888 at the end of next year, and $124,332 at the end of the year after that (three years from today). The interest rate is 3.8% per year a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?arrow_forwardA. Jug pays $9,500 for an investment that pays an annual dividend of $500. The investment has a face value of 15,000 payable on the maturity date. If Jug holds the investment until its maturity date in 2023 (3 years' times), what will be his holding return (%) on investment? What will be the annualized return on his investment? (Show your calculations) Use financial calculator where applicablearrow_forward
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