Annual interest rate compounded annually

Assignment Help Financial Management
Reference no: EM131020326

A rich uncle passed away, his will states that you will receive 2 payments of $40,000 each year. The first payment will occur exactly a year from now. Your cousin offers to purchase your 2 payments of $40,000. With a 10% annual interest rate compounded annually, what is the minimum price (rounded to the nearest 10) that you should sell your 2 payments for right now? Show work by hand (show equations used)

a) $63,410

b) $69,420

c) $74,110

d) $78,880

e) $80,000

f) $84,100

Reference no: EM131020326

Questions Cloud

Whose interests are paramount : Lauren's first job after graduation was working as a quality engineer with a highly respected technology company. Whose interests are paramount? Lauren's, Lauren's company, the customer
What is this firms debt-equity ratio : Jiminy Cricket Removal has a profit margin of 9 percent, total asset turnover of 1.07, and ROE of 14.39 percent. What is this firm’s debt-equity ratio?
What course of action should annie take : Annie has been recently hired full time at a major tech company where she interned for two summers during her college career What course of action should Annie take
Advantages of the corporate form of organization : Which of the following are advantages of the corporate form of organization?
Annual interest rate compounded annually : A rich uncle passed away, his will states that you will receive 2 payments of $40,000 each year. The first payment will occur exactly a year from now. Your cousin offers to purchase your 2 payments of $40,000. With a 10% annual interest rate compound..
How should cindy react in this situation : How should Cindy react in this situation? Is it Cindy's place to step in and say anything, or should she stay out of the situation all together
Fund starts making annual scholarship payments forever : April wants to create a scholarship fund by making annual savings donations to the fund for several years before the fund starts making annual scholarship payments forever. She plans to save 22,900 dollars per year in the trust fund for 5 years.
How should firms deal with employee theft : Given the growing evidence of this problem, should retailers abandon the use of police interrogation techniques in their investigations? How should firms deal with employee theft
Capital structure decision : Which one of the following is a capital structure decision?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the expected return of your portfolio

Stock J has a beta of 1.20 and an expected return of 13.16 percent, while Stock K has a beta of .75 and an expected return of 10.10 percent. You want a portfolio with the same risk as the market. What is the expected return of your portfolio?

  General ledger accounts of a new capital projects fund

The following transactions tok place in the town of Burchette during 20X3: A bond issue of $12,000,000 was authorized for the construction of a library, and the estimated bond issue proceeds and related appropriations were recorded in the General Led..

  What is a mutually exclusive investment project

What is a mutually exclusive investment project? An independent project? A contingent project? Give an example of each. What effect does capital rationing have on a firm's ability to maximize shareholder wealth?

  What is the bonds annualized yield-to-maturity

A zero-coupon bond with face value $1,000 and maturity of 300 days sells for $988.22. a.) What is the bond's nominal yield to maturity? b.) What is the bond's annualized yield-to-maturity?

  Estimate the present value of the cash flows

QKL Co. plans a new project that will generate 187,000 of cash flow at the end of each year for 8 years and additionally 108,000 at the end of the project. If hte continuoysly compounded rate of interest is 4%, estimate the present value of the ca..

  Use of cash

Which one of the following is a use of cash?

  Calculate the payback period-internal rate of return

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. Construct a spreadsheet to calculate the payback period, internal rat..

  Probability return standard deviation beta

Project 1 Probability Return Standard Deviation Beta 50% chance 22% 12% 1.1 50% chance - 4% Project 2 Probability Return Standard Deviation Beta 30% chance 36% 19.5% 0.8 40% chance 10.5% 30% chance - 20% Project 3 Project 2 Project 1 Either Project 2..

  Shareholders equal rights in the event of triggering event

Clint Wade owns 70 percent of the stock of Knock-Down Inc., a demolition and gravel supply company. The remaining 30 percent of the stock is owned in equal shares by three of the key managers of the business. The agreement gives all the shareholders ..

  Based on semi-annual analysis-what is current price of bond

ABC Corp. issued a 12 percent, 20 year coupon rate bond 5 years ago. Interest rates are now 8 percent. The par value of the bond is $1,000. Based on semi-annual analysis, what is the current price of the bond?

  Junior intends to hold the investment indefinitely

Junior just received his annual bonus and is looking to invest it in one of two potential investments. Junior is considering a 15-year 8% coupon bond issued by Home Co that is currently selling for $1,032.67. Residential current stock price is $45.82..

  Fixed costs involved in the production process

Break-even analysis The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $13 and has a variable cost of $8. There are $20,000 in fixed costs involved in the production process. Compu..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd