Calculate the present value of your payments to the bank

Assignment Help Financial Management
Reference no: EM131524018

A local bank advertises the following deal: Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever. a. Calculate the present value of your payments to the bank if the interest rate available on other deposits is 6.75%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate available on other deposits is 6.75%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ c. Is this a good deal? Yes No

Reference no: EM131524018

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the value of the bondholders call option

A 10-year maturity convertible bond with a face value of $1,000 and a 6% coupon on a company with a bond rating of Aaa is selling for $1,050. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is ..

  Similar operations and financial structures as the industry

Assume each firm within an industry has similar operations and financial structures as the industry as a whole. Which one of these statements related to beta is correct given this assumption?

  Corporation with taxable income

A corporation with a taxable income of $50 million is considering a new venture that would generate an additional $500,000 per year in taxable income. How much additional federal income tax will they pay on this additional income?

  Is this issue relevant for a storage hedge

When production yield is uncertain, what does this suggest in terms of how much of a growing crop to hedge? Is this issue relevant for a storage hedge? Is this issue relevant for a livestock hedge? Explain why.

  Computing annuity payment

Computing annuity payment: John Harper has borrowed $17,400 to pay for his new truck. The annual interest rate on the loan is 9.4 percent, and the loan needs to be repaid in four payments. What will be his annual payment if he begins his payment begi..

  Homework adams food service has issued 7 38 bonds that

ltbrgtadams food service has issued 7 38 bonds that mature on july 15th 2042. the bonds are callable 1037.08 on july

  How much would you make on a block trade of shares

Walgreen Company (NYSE: WAG) is currently trading at $48.75 on the NYSE. Walgreen Company is also listed on NASDAQ and assumes it is currently trading on NASDAQ at $48.50. Does an arbitrage opportunity exists and if so how would you exploit it and ho..

  Capital structures-levered plan and all-equity plan

'Break-Even EBIT Yasmin Corporation is comparing Ovo different capital structures, an all-equity plan (Pian l) and a levered plan (Plan Il). Under Plan J, Yasmin would have 170,000 shares of stock outstanding. Under Plan ll. What is the break-even EB..

  What is the effective cost of bank financing

What is the effective cost of bank financing if the loan amount is $100,000, interest is discounted (advance), a 1% commitment fee is paid up front,

  What is the gain-loss on the retirement of these bonds

Fort Collins Company retired $800,000 of 7% bonds payable at 97 on June 30, 2012, two years before the bonds matured. The bond book value on June 30, 2012 is $770,000, and bond interest is paid up to the date of retirement. What is the gain/loss on t..

  Securities profit on the offering if secondary market price

Determine LaJolla Securities' profit on the offering if the secondary market price of the shares immediately after the offering began were as follows:

  Regarding tax treatment of payments to securities holders

Regarding the tax treatment of payments to securities holders, it is true that _____.

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