Reference no: EM13214834
Part A: Given the following cash inflow at the end of each year, what is the future value of this cash flow at 6%, 9%, and 15% interest rates at the end of the seventh year?
Year 1 $15,000
Year 2 $20,000
Year 3 $30,000
Years 4 through 6 $0
Year 7 $150,000
Part B: County Ranch Insurance Company wants to offer a guaranteed annuity in units of $500, payable at the end of each year for 25 years. The company has a strong investment record and can consistently earn 7% on its investments after taxes. If the company wants to make 1% on this contract, what price should it set on it? Use 6% as the discount rate. Assume that it is an ordinary annuity and that the price is the same as present value.
Part C: A local government is about to run a lottery but does not want to be involved in the payoff if a winner picks an annuity payoff. The government contracts with a trust to pay the lump-sum payout to the trust and have the trust (probably a local bank) pay the annual payments. The first winner of the lottery chooses the annuity and will receive $150,000 a year for the next 25 years. The local government will give the trust $2,000,000 to pay for this annuity. What investment rate must the trust earn to break even on this arrangement?
Part D: Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the $5,000,000 advertised jackpot. You can take annual payments of $250,000 for the next 20 years or $2,867,480 today.
a. If your investment rate over the next 20 years is 8%, which payoff will you choose?
b. If your investment rate over the next 20 years is 5%, which payoff will you choose?
c. At what investment rate will the annuity stream of $250,000 be the same as the lump sum payment of $2,867,480?
|
Case study on royal bank of canada in thailand
: This case analyzes the problems facing a bank in a foreign country and the reasons for deciding to stay or to close its operation. Royal Bank of Canada is the bank involved in this real life situation.
|
|
Gross income for computer repair business
: In this project, you will enter in the correct formulas or functions needed to find out the monthly gross income for a computer repair business. To view these instructions while working in Excel, print these instructions or move back and forth betwee..
|
|
Calculate the present value of each investment
: Your client is considering the purchase of $100,000 in common stock, which pays no dividends and will appreciate in market value by 10 percent per year. At the same time, the client is considering an opportunity to invest $100,000 in a lease oblig..
|
|
Which ratio appears on a common-size balance sheet
: Grandma's Applesauce, Inc. has a 0.60 probability of a good year with operating cash flow of $50,000; and 0.40 probability of a bad year with operating cash flow of $30,000. The company has a debt of $35,000 with 8 percent interest due next year.
|
|
Explain the government contracts with a trust to pay
: A local government is about to run a lottery but does not want to be involved in the payoff if a winner picks an annuity payoff. The government contracts with a trust to pay the lump-sum payout to the trust and have the trust (probably a local ban..
|
|
How you would apply econometrics in your advice
: Discuss what interests you the most about econometrics and state why.
|
|
How do peers affect delinquency
: How do peers affect delinquency? Do delinquents seek out antisocial and delinquent peers as friends or does having delinquent peers cause an individual to become delinquent?
|
|
Prepare journal entries to record income and deffered tax
: On January 1, 2014, Valley Company entered into a 3-year construction contract that had an estimated gross revenue of P3,000,000. The entity used the percentage of completion method in recognizing income on its books.
|
|
Learn about ourselves as we learn obout others
: What does this mean" learn about ourselves as we learn obout others;conversely, we learn about others through leraning about ourselves"
|