\n| \n Year<\/p>\n<\/td>\n | \n Cash Flow from A<\/u><\/p>\n<\/td>\n | <\/td>\n | \n Cash Flow from B<\/u><\/p>\n<\/td>\n<\/tr>\n\n| \n 1<\/p>\n<\/td>\n | \n $1,200<\/p>\n<\/td>\n | <\/td>\n | \n $1,400<\/p>\n<\/td>\n<\/tr>\n | \n| \n 2<\/p>\n<\/td>\n | \n 1,100<\/p>\n<\/td>\n | <\/td>\n | \n 1,900<\/p>\n<\/td>\n<\/tr>\n | \n| \n 3<\/p>\n<\/td>\n | \n 800<\/p>\n<\/td>\n | <\/td>\n | \n 3400<\/p>\n<\/td>\n<\/tr>\n | \n| \n 4<\/p>\n<\/td>\n | \n 600<\/p>\n<\/td>\n | <\/td>\n | \n 4300<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n 5. Annuity and Perpetuity<\/strong><\/p>\nYou are going to receive a 30-year annuity of $105,000. Your friend, Nancy, is going to receive a perpetuity of $105,000. If the appropriate interest rate is 7% p.a., how much more is Nancy’s cash flow worth than yours?<\/p>\n 6. Comparing Cash Flows<\/strong><\/p>\nYou’ve just joined a new firm. They offered you two different salary arrangements:<\/p>\n A. $6,100 per month for the next two years.<\/p>\n B. $4,800 per month for the next two years, plus a $25,000 signing bonus.<\/p>\n If the interest rate is 7% p.a., which arrangement do you prefer?<\/p>\n 7. Future Values<\/strong><\/p>\nAssuming an interest rate of 6.9% p.a., what is the future value of the following cash flows five years from now? What is the future value 10 years from now?<\/p>\n \n\n\n| \n Year to find value<\/p>\n<\/td>\n | \n 10<\/p>\n<\/td>\n<\/tr>\n | \n| \n Interest rate<\/p>\n<\/td>\n | \n 6.9%<\/p>\n<\/td>\n<\/tr>\n | \n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n Year<\/p>\n<\/td>\n | \n Cash flow<\/p>\n<\/td>\n<\/tr>\n | \n| \n 2<\/p>\n<\/td>\n | \n $ 15,000<\/p>\n<\/td>\n<\/tr>\n | \n| \n 3<\/p>\n<\/td>\n | \n 24,000<\/p>\n<\/td>\n<\/tr>\n | \n| \n 5<\/p>\n<\/td>\n | \n 33,000<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n 8. Future Values<\/strong><\/p>\nAn insurance company is offering a new policy. The parent makes the following six payments to the insurance company, and no more payments after child’s sixth birthday. When the child reaches age 65, he\/she receives $350,000. If the interest rate is 10% for the first 6 years, and 7% for all subsequent years, is the policy worth buying?<\/p>\n \n\n\n| \n Year<\/u><\/p>\n<\/td>\n | \n Payment <\/u><\/p>\n<\/td>\n<\/tr>\n\n| \n 1<\/p>\n<\/td>\n | \n $ 800<\/p>\n<\/td>\n<\/tr>\n | \n| \n 2<\/p>\n<\/td>\n | \n $ 800<\/p>\n<\/td>\n<\/tr>\n | \n| \n 3<\/p>\n<\/td>\n | \n $ 900<\/p>\n<\/td>\n<\/tr>\n | \n| \n 4<\/p>\n<\/td>\n | \n $ 900<\/p>\n<\/td>\n<\/tr>\n | \n| \n 5<\/p>\n<\/td>\n | \n $ 1,000<\/p>\n<\/td>\n<\/tr>\n | \n| \n 6<\/p>\n<\/td>\n | \n $ 1,000<\/p>\n<\/td>\n<\/tr>\n | \n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n # of years until retirement<\/p>\n<\/td>\n | \n 65<\/p>\n<\/td>\n<\/tr>\n | \n| \n Payout at retirement<\/p>\n<\/td>\n | \n $ 350,000<\/p>\n<\/td>\n<\/tr>\n | \n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n Interest rate 1<\/p>\n<\/td>\n | \n 10%<\/p>\n<\/td>\n<\/tr>\n | \n| \n # of years<\/p>\n<\/td>\n | \n 6<\/p>\n<\/td>\n<\/tr>\n | \n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n Interest rate 2<\/p>\n<\/td>\n | \n 7%<\/p>\n<\/td>\n<\/tr>\n | \n| \n # of years<\/p>\n<\/td>\n | \n 59<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Please complete In Excel 1. Perpetuity If an investment policy pays you $25,000 per year forever and you require 6% p.a. return on this investment, how much will you pay for this policy? What about a policy that pays $30,000 per year? 2. EAR Calculate the EAR in the following cases: APR compounding EAR 10% […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_joinchat":[]},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/173197"}],"collection":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/comments?post=173197"}],"version-history":[{"count":0,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/173197\/revisions"}],"wp:attachment":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/media?parent=173197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/categories?post=173197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/tags?post=173197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} | | | | |