Explore BrainMass


Financial Management

You are considering investing in a bank account that pays a nominal annual rate of 6.9 percent, compounded monthly. If you invest $3,000 at the end of each month, how many months will it take for your account to grow to $150,000?

Account growth

Considering investing in a bank account that pays a nominal annual rate of 6.7 percent, compounded monthly. If you invest$3,200 at the end of each month, how many months will it take for your account to grow to $150,000?

Monthly and Annual Payments

Please address the following questions: 1. What is the future value of a 5 year ordinary annuity with annual payments of $200 evaluated at a 15% interest rate? 2. You have just taken out an instalment loan for $100,000. Assume that the loan will be repaid in 12 equal monthly instalments of $9,456 and the first monthly pa

Effective Annual Rate Investment

An investment instrument pays $1.35 million at the end of each of the next ten years. An investor has an alternative investment with the same amount of risk that will pay interest at 8.5 percent, compounded quartely. What effective rate should you receive in this investment? How much should you pay for the mortgage instru


Your aunt has $350,000 invested at 5.5%, and she now wants to retire. She wants to withdraw $45,000 at the beginning of each year, beginning immediately. She also wants to have $50,000 left to give you when she ceases to withdraw funds from the account. For how many years can she make the $45,000 withdrawals and still have $50,0


Suppose you just won the state lottery, and you have a choice between receiving $2,075,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.


Your uncle is about to retire, and he wants to buy an annuity that will provide him with $73,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?


Sam was injured in an accident, and the insurance company has offered him the choice of $49,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity?

Interest Rates on Annuities

Determine the annual interest rate that is needed for the following annuities to accumulate to $25,000. Assume payments are made at the end of each period. 1. Quarterly payments of $1,864 for 3 years, interest compounded quarterly. 2. Annual payments of $4,095 for 5 years, interest, compounded annually 3. Semiannual paym

Present Value of an Annuity Computation

Jean will receive $8,500 per year for the next 15 years from her trust. If a 7% interest rate is applied, what is the current value of the future payments? Describe how you solved this problem, including which table (for example, present value and future value) was used and why.

Lumpsum or Annuity Option

I need help determining which option would be the best choice. You have won a lottery and are given a choice on how to collect your winning. You can choice $1,000,000 lump sum or you can choose $80,000 ordinary annuity for the next 30 years. If you earn an interest rate of 8% on your funds, which of the two options should yo

Insurance Planning

Sue and Tom Wright are assistant professors at the local university. They each take home about $42,000 per year after taxes. Sue is 37 years of age, and Tom is 35. Their two children, Mike and Karen, are 11 and 9. Were either one to die, they estimate that the remaining family members would need about 75% of the present combi

General Accounting

Use the following information for questions 1 and 2. The following information was available from the inventory records of Rich Company for January: Units Unit Cost Total Cost Balance at January 1 3,000 $9.77 $29,310 Purchases: January 6 2,000 10.30 20,600 January 26 2,700 10.71 28,917 Sales: January

Comparing Investments

A 2-year $1,000 par zero-coupon bond is currently priced at $819.00. A 2-year $1,000 annuity is currently priced at $1,712.52. Assume: a. the pure expectations theory of interest rates holds, b. neither bond has any default risk, maturity premium, or liquidity premium, and c. you can purchase partial bonds. If you want to in

Valuing Bonds Using Present Value

Please help! Using the attachments for detail, can you help me with this question and any on the attached JPG files? Use the present value tables in the appendix (files attached) on the future value and present value tables to calculate the issue price of a $600,000 bond issue in each of the following independent cases. Assum

Compound interest vs annuity: Calculations for option 1 and 2. Which is better?

As a financial planner a client comes to you for investment advice. After meeting with him and understanding his needs, you offer him the following two investment options: Option 1: Invest $20,500 in a savings account at 5.4% interest compounded quarterly. Option 2: Invest into an ordinary annuity where $4,500 is deposi

Compare Periodic Payments to a Lump Sum

Carolyn Ellis is setting up an annuity for her retirement. She can set aside $2,000 at the end of each year for the next 20 years and it will earn 6% annual interest. What lump sum will she need to set aside today at 6% annual interest to have the same retirement fund available 20 years from now? How much more will Carolyn need

BUS MATH: 15 ordinary annuity and annuity due problems

1. $111,834 is the amount of an ordinary annuity of $6,000 for 4 years at 8% compounded quarterly. () True False 2. The monthly payment of rent is an example of a renter's annuity. () True False 3. A contingent annuity has a specific number of payment periods. () True F

Time Value of Money Annuities Calculations

If you put up $21,000 today in exchange for a 9.25 percent, 17-year annuity, the annual cash flow will be $ . (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Your company will generate $61,000 in cash flow each year for the next 9 years from a new information database. The computer system ne

PV of cash flows

See attached format. RAP Manufacturing, Inc. produces microwave ovens, electric ranges, and freezers. Due to increasing competition, President Bob Pearson is considering investing in a computer-aided manufacturing (CAM) system. The company's microwave plant has been selected for initial evaluation. The CAM system for the m

Numerous Present and Future Value Problems

3.19 How much money was deposited each year for 5 years if the account is now worth $100,000 and the last deposit was made 10 years ago? Assume the account earned interest at 7% per year. 4.11 What nominal interest rate per year is equivalent to an effective 16% per year compounded semiannually? 4.17 Depos

Financial Analysis - Time Value

I need you help with the attached problem sets. Week 2 Problem Set Problems Suppose that you observe the following term structure for Treasury securities: Term to Maturity (Year) Interest Rates (%) 1 12.00% 2 11.75 3 11.25 4 10.00 5 9.25 a. Calculate the forward rates for year 1,2,3,4, and 5. b. Use this informati

Calculating Equal Periodic Deposits

You want to have $30,000 in your savings account eight years from now, and you're prepared to make equal annual deposits into the account at the end of each year. If the amount pays 5.25 percent interest, what amount must you deposit each year?

Calculate PV, FV and annual amounts of annuity payments

If I borrow 60,000 from the bank at 10% interest over the seven-year life of the loan, what equal annual payments must be made to discharge the loan plus pay the bank its required rate of interest. Annual payments_____. How much of this first payment will be applied to interest? to principal? Also how much of my second payment

Please help with accounting study questions

1. The accountant's primary function is A) evaluating the financial statements. B) making decisions based on financial data. C) the collection and presentation of financial data. D) planning cash flows. 2. A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is exp

Calculate FV of deposits, annuities, amortize payments, rate of return, EVA

1- You want to go to grad school 3 years from now, and you can save $5,000 per year, beginning one year from today. You plan to deposit the funds in a mutual fund which you expect to return 9% per year. Under these conditions, how much will you have just after you make the 3rd deposit, 3 years from now? 2- You want to go to g


5-1 How long will it take $ 200 to double if it earns the following rates? Compounding occurs once a year. 5-2 Find the present values of these ordinary annuities. Discounting occurs once a year. a. $ 400 per year for 10 years at 10% b. $ 200 per year for 5 years at 5% c. $ 400 per year for 5 years at 0% d. Rework Par