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What is the present value of this liability

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A. You're trying to save to buy a new $225,000 Ferrari. You have $45,000 today that can be invested at your bank. The bank pays 4.8 percent annual interest on its accounts. How long will it be before you have enough to buy the car?

B. Johnson, Inc., has an unfunded pension liability of $475 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 6.1 percent, what is the present value of this liability?

C. You have just received notification that you have won the $2 million first prize in the NYC Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 80 years from now. What is the present value of your windfall if the appropriate discount rate is 7.5 percent?

D. Your coin collection contains fifty 1952 silver dollars. If your grandparents purchased them for their face value when they were new, how much will your collection be worth when you retire in 2063, assuming they appreciate at an annual rate of 4.3 percent?

Reference no: EM133122602

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