Make the present value of both prizes equivalent

Assignment Help Financial Management
Reference no: EM131300758

John has just won the lottery. John has won the lump sum amount of $1550 but must wait until the end of 10 years to receive the prize. John would rather receive a different pattern of payments: $250 today and then receive some unknown lump sum amount that will be received in 10 years. Using an interest rate of 2.50%, determine the unknown lump sum amount that would make the present value of both prizes equivalent.

Reference no: EM131300758

Questions Cloud

Determine one policy that could prevent unfair trials in us : Identify one or two impediments that may prevent an average citizen from receiving a fair trial in the U.S. Then, determine at least one policy that could prevent unfair trials in the U.S. court system.
Office of inspector general work plan : Review the Office of Inspector General Work Plan: Selected Areas for Review in Billing and Claims Processing, Fiscal Year 2013. Discuss actions that a healthcare organization can take to eliminate or reduce government penalties under this plan. Yo..
The second account earns interest at force of interest : Lily has two bank accounts. Suppose that the first account earns interest at a nominal discount rate of d^(2), convertible semiannually. The second account earns interest at a force of interest δ. After 6.75 years, the value in each account is $250. ..
Explains to the board of directors about the balance sheet : Write a 350- to 700-word executive summary that explains to the board of directors how you developed the balance sheet and its importance.
Make the present value of both prizes equivalent : John has just won the lottery. John has won the lump sum amount of $1550 but must wait until the end of 10 years to receive the prize. John would rather receive a different pattern of payments: $250 today and then receive some unknown lump sum amount..
Estimate the wall temperatures and the heat transfer rate : Estimate the receiver wall temperature and the heat transfer to the ambient air at 25°C. To facilitate use of the free convection correlations with appropriate film temperatures, assume that the receiver wall temperature is 60°C.
When considering time value of money : What considerations do you need to take when considering "time value of money"? With regards to money: What are the differences between future value and present value?
Company align organizational and employee goals : In what ways can a company align organizational and employee goals? How can a company ensure that employees are focused on the right goals? (please address both parts)
Which of the following statements is correct : A 10-year corporate bond has an annual coupon payment of 9 percent. The bond is currently selling at par ($1,000). Which of the following statements is correct

Reviews

Write a Review

Financial Management Questions & Answers

  What is the IRR of the new investment

ABC Company is considering a new investment that will cost 50,000 to produce a new product that the president of the company has invented. The marketing dept of the company anticipates the new cash flows from the investment will be 10,000, 12,000, 12..

  Interest expenses-what is the operating cash flow

Your firm has net income of $273 on total sales of $1,240. Costs are $690 and depreciation is $130. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow?

  Fund has current assets with market value

The World Income Appreciation Fund has current assets with a market value of $11.7 billion, 350 million shares outstanding, and a current market price quotation of $35.08. Calculate the front-end load.

  Treasury bond call option with a strike price

A firm buys a December $100,000 Treasury bond call option with a strike price of 110. - If the spot price in December is $108,000, is the option exercised?

  Company effective tax rate and cost of equity

A company has a capital structure of 40% debt and 60% equity. The YTM on the company’s bonds is 9%, and the company’s effective tax rate is 40%. The cost of equity is 13%. What is the company’s WACC?

  Part of the mortgage closing costs

Mike purchased a sports shop for $186,000. His bank is willing to finance 75% of the purchase price. As part of the mortgage closing costs, Mike had to pay 3 1/4 discount points. How much did this amount to?

  Telecommunications equipment-shares of common stock

FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares sell for $29 per share, the preferred shares se..

  What is the statement of cash flows

What is the statement of cash flows, and how does it differ from the income statement? What are the three major section of the statement of cash flows? What is the most important line on the statement of cash flows?

  Private cemetery business is looking up

The Xdiagnose Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” The project requires an initial investment of $2.4 million. If Xdiagnose requires a 13 percent return on such undert..

  1 if a firm raises capital by selling new bonds it would be

1. if a firm raises capital by selling new bonds it would be called the issuing firm and the coupon rate is usually set

  What is the yield to maturity-each bond carries six percent

Bonds issued 14 years ago by Kramer Manufacturing mature in 11 years and have a $1,000 face value. Each bond carries a 6 percent coupon, payable semiannually, and currently sells for $993.65. What is the yield to maturity? 5.87 percent 5.92 percent 6..

  Take tuition stabilization plan-taking cheaper alternative

Your sending your daughter to a prestigious private college starting next year. She will attend for four years. The current cost for one year is $60,000, but is expected to rise 2% per year over the next 10 years. If your investments earn 6% per year..

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