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# Annuity

### Financial concepts - Time Value of Money

Problem: Use the future value interest factors in Appendix Table A-1 in each fo the cases shown below to estimate, to the nearest year, how long it would take an initial deposit, assuming no withdrawals. a.To double b.To quadruple Case Interest rate A 7% B 40% C 20% D 10% Pr

### Jump start for reviewing

1. The present value of a ten year \$100 annual annuity discounted at 12% is: a. \$32.19 b. \$89.28 c. \$565.02 d. \$310.58 2. The present value of a single sum of \$100 to be received in 10 years and discounted at a annual 12% rate on a semi-annual basis is: a. \$32.19 b. \$31.18 c. \$100 d. \$310.58 3. The best way to

### The preferred stock of Gapers Inc. pays an annual dividend of \$6.50. What is the price of the preferred stock if the required return is:

Question 1 The preferred stock of Gapers Inc. pays an annual dividend of \$6.50. What is the price of the preferred stock if the required return is: (a) 6% (b) 8% (c) 10% Question 2 Marcia Stubern is planning for her golden years. She will retire in 20 years, at which time she plans to begin withdrawing

### Compound and simple interest, PV, annuities, FV, sinking funds

Congratulations! You have been hired by XYZ Advertising. You have been placed on an advertising team with your first big client, a local financial institution; however, you are somewhat nervous to join the advertising team as your financial knowledge and background are somewhat limited. Thus, before putting together an ad campai

### Present Value of winnings

The USA Sweepstakes has informed Nancy that she won \$1 million. The amount is to be paid out at a rate of \$50,000 a year for the next 20 years. What is the present value of her winnings with a discount rate of 12 percent?

### Lottery Winning: Yearly Annuity Vs Lumpsum Payment

You win \$5,000,000 in the lottery. You can take it all now or receive payments over the next twenty years. Assume the discount rate is 4%. Calculate and show the ending amount as well as explain what is the value of money represented by the situation and how did you arrive at the value?

### Periodic payment must be made to an account to achieve

IRA Investments develops retirement programs for individuals. You are 30 years old and plan to retire on your 60th birthday. You want to establish a plan with IRA that will require a series of equal, annual, end-of-year deposits into the retirement account. The first deposit will be made 1 year from today on your 31st birthday.

### Present Value of a stream of cash flows

Find the present value of the following stream of cash flows assuming that the firm's cost is 14% and that these amounts are received at the end of each year. Year Amount 1 - 5 \$20,000/year 6 - 10 \$35,000/year

### Determining time value of money: Example problem

Keith Stone has 10-year old daughter, Kate, who will be entering college in 8 years. Keith estimate college costs to be \$16,000 \$17,000, \$18,000 and \$19,000 payable at the beginning of each of Kate's four years in college. He has \$2,000 in his account and intends to leave it there for the next 8 years. How much more must Kei

### Four basic calculations: PV & FV of a lump sum, PV & FV of an annuity. Differences?

There are four basic calculations: PV of a lump sum, FV of a lump sum, PV of an annuity, and FV of an annuity. Discuss the differences between each. Use examples to help explain.

### Finance: 25 Problems and Questions, TF, MC,

See attached file. True/False 1. In limited liability partnerships, the liability protection does not protect partners from their individual acts of malpractice. 2. Unlike an S corporation, the limited liability corporation (LLC) can own more than 80 percent of another corporation, and corporations, partnerships, or

### Kangaroo Autos or Turtle Motors: which offer is better for a \$10,000 car.

Kangaroo Autos is offering free credit on a new \$10,000 car. You pay \$1,000 down and then \$300 a month for the next 30 months. Turtle Motors next door does not offer free credit but will give you \$1,000 off the list price. If the rate of interest is 10 percent a year, (about .83 percent a month) which company is offering the bet

### Time Value and Money Description

From any general internet source provide a brief description of an example that illustrates the use of the time value of money. Please cite and reference the source.

### Calculating Present Values of future cash flows.

I) Use Excel to perform the following calculations. Label each input and the output of your calculations. Highlight your final answer using the yellow highlighter on the top right menu bar. Assume for each part that the interest rate is 8% per year. (1) What is the present value of \$8000 to be received in five years? (2) W

### Prepare a 1040 (including schedules A, B, D and Form 3903) - Donna Harp Scenario

Please see the attached PDF and assist with final preparation of the 1040 including schedules A, B and D and Form 3903. Please give step by step instructions as to where each transaction is applied in the process of preparing the returns so that I have a better clarification. Also please demonstrate the calculations on the gai

### Step-wise answer to Present Value

1. Present value calculations. Using a present value table, your calculator, or a computer program present value function, answer the following questions: a. What is the present value of nine annual cash payments of \$4,000, to be paid at the end of each year using an interest rate of 6%? b. What is the present value of \$15,000

### If you deposit \$1,000 each year in a savings account earning 4%, compounded annually, how much will you have in 10 years?

1. If you deposit \$1,000 each year in a savings account earning 4%, compounded annually, how much will you have in 10 years? 2. You have decided to invest \$500 in a mutual fund today and make \$500 end-of-the-year investments in the fund each year until you retire for 40 years. Assuming an opportunity cost of 12%, what

### Your Firm is Considering Leasing a New Computer

14) Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of \$1,000 per year with the first payment occurring immediately. The computer would cost \$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligib

### equivalent annual cost over machine life calculation example

Two machines, A and B, which perform the same functions, have the following costs and lives. Type PV Costs Life machine A \$6000 5 machine B \$8000 7 Which machine would you choose? Justify your decision. The two machines are mutually exclusive and the cost of capital is 15%.

### Present Value, Purchases, Interest Rate and Journal Entries

Help with solving these review questions that are similar to the final exam. Need to show steps please so that I can familiarize myself. Thanks!!! 1a Johnson Company is contemplating the purchase of a machine that provides it with net after-tax cash savings of \$80,000 per year for 5 years. Interest is 8%. Assume the cash sav

### Compound Interest and Payments

1.What's the future value of \$2,000 after 3 years if the appropriate interest rate is 8%, compounded monthly? 2.Suppose you borrowed \$25,000 at a rate of 8% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be? 3. You are buying your first house for \$220,000, a

Funding your retirement. You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive \$20,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year durin

### Present value, present value of annuity

What is the relationship between the PVIFi,n (Table 5-4) and the PVIFAi,n (Table 5-8)? What is the PVIFA10%,10yrs? Add up the values of the PVIF10%,n for n = 1, ..., 10. What is this value? Why do these values have the relationship they do? Please see the attached Tables

### Determining annual installments

Problems: a. If you borrow \$1,000 and agree to repay the loan in five equal annual payments at an interest rate of 12 percent, what will your payment be? b. What if you make the first payment on the loan immediately instead of at the end of the first year?

### Time Value of Money

PLEASE SEE ATTACHMENT THANKS I NEED HELP WITH THE ANNUITY PAYMENT (HIGHLIGHTED IN YELLOW) WHICH HAS TO BE POSITIVE AND NOT NEGATIVE. Directly below these instructions is a blank table to compute PV factors. Using cell formulas or functions, calculate the PV for the years and interest rates given. Remember, only

### Comparing two payment options

Upon retirement, you are offered a choice between a \$250,000 lump sum payment or a lifetime annuity of \$51,200. If you expect to live for 15 years after retirement, at what required rate of return would you be indifferent between the two alternatives?

### Calculate annuities for required return

I need some help on computing rate of return. If I had 400.00 in a 12 year annuity. The rate of return I require is 9%. What annual cash flow from the annuity will provide the required return. I need to understand the formula and how you come to answer.

### Alexis Mantle recently won a lottery and has the option of receiving one of the following three prizes: (1) \$64,000 cash immediately, (2) \$20,000 cash immediately and six-period annuity of \$8,000

1. Alexis Mantle recently won a lottery and has the option of receiving one of the following three prizes: (1) \$64,000 cash immediately, (2) \$20,000 cash immediately and six-period annuity of \$8,000 beginning one year from today, or (3) a six-period annuity of \$13,000 beginning one year from today. Assuming an interest rate of

### If managers are making decisions to maximize shareholder wealth, then they are

1 If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should: a. Positively affect profits. b. Increase the market value of the firm's common stock. c. Either increase or have no effect on the value of the fi

### Table for Value of Sum Today

You are to receive \$12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today? Present value of an annuity of \$1 Future value of an annuity Present value of \$1 Future value of \$1