Describe the relationship between (i) future value and interest rate; (ii) future value and time period. What about the relationship between the present value and the same variables mentioned in (i) and (ii)?
Why is the future value of an annuity due always greater than that of an ordinary annuity?
You are hurt in a car accident and your lawyer wins a $100,000 settlement to be distributed as follows:
• $20,000 immediate payment
• $5,000 a year for ten years starting now
• $30,000 after ten years.
If the lawyer's fee is $10,000, what is the value of this settlement if the interest rate is 10 percent?
A state lotto awarded a prize of $560,000 a year for the next 20 years starting today. If the state sold $21,900,000 in lotto tickets, what proportion of the sales will the state distribute if it earns 8% annually on invested funds?
e. A fi$ has a $1,000,000 debt (e.g., a bond) outstanding that matures after 10 years. The sinking fund requires the fi$ to set aside annually an amount so the debt may be retired at maturity. If the fi$ can earn 10% annually on these funds, how much must it invest annually to meet the sinking fund?
Describe the relationship between following variables:
i) future value and interest rate;
ii) future value and time period;
iii) present value and interest rate; and
iv) present value and time period.