Exam 4: Time Value of Money - Streams and Valuations

Ferrari offers the 360 Spider for $160,724 cash.Ferrari also advertises a purchase plan with 4.5% APR financing and 48 end-of-month payments of $3,862.Which is the better deal?

The future value of an ordinary annuity of $1,000 each year for 10 years,deposited at 3 percent,is: (Round to the nearest whole dollar)

Bill plans to fund his individual retirement account (IRA)with a maximum contribution of $2,000 at the end of each year for the next 20 years.If Bill can earn 12 percent on his contributions,how much will he have at the end of twentieth year? (Round to the nearest whole dollar)

You just won the Sweepstakes and have decided to take your winning in 15 equal payments of $35,000.You decide to save all of this money for your retirement and deposit it into an account that earns 11% per year.What is the amount of your retirement nest egg? (Round to the nearest whole dollar)

If you buy a factory for $250,000 and the terms are 20% down,the balance to be paid off over 30 years at a 12 percent rate of interest on the unpaid balance,what are the 30 equal annual payments? (Round to the nearest whole dollar)

The rate of return earned on an investment of $50,000 today that guarantees an annuity of $10,489 for six years in approximately:

In payment for his help with the construction of Valhalla,Wotan offers Fafner two alternatives.First,he offers $1,260 per year forever (with the first payment in one year).Second,he offers his sister-in-law,Freia (the girl with the golden apples).If Fafner thinks that Freia is worth $12,000 and his required rate of return is 10.5%,which of the following is correct?

A 10-year ordinary annuity that provides a return of 7% has a present value of $15,000.What are the annual annuity payments?

Assume that your required rate of return is 12% and you are given the following stream of cash flows: If payments are made at the end of each period,what is the present value of the cash flow stream? (Round to the nearest whole dollar)

Suppose the present value of a 2-year ordinary annuity is $100.If the discount rate is 10%,what must be the annual cash flow?

A generous benefactor to the local ballet plans to make a one-time endowment which would provide the ballet with $150,000 per year into perpetuity.The rate of interest is expected to be 5 percent for all future time periods.How large must the endowment be?

What is the present value of a $50 perpetuity if interest rates are 7%?

Find the present value of a 5-year annuity due if the annual payments are $600 and the interest rate is 11%.How much larger is the present value of the annuity due than the present value of the ordinary 5-year annuity?

Express Airlines is considering the purchase of an aircraft to supplement its current fleet.In estimating the impact of adding this aircraft to the fleet,management has developed the following expected cash flows: If the discount rate is 10%,what is the present value of these estimated flows? (Round to the nearest whole dollar)

Assume you are to receive a 20-year annuity with annual payments of $50.The first payment will be received at the end of Year 1,and the last payment will be received at the end of Year 20.You will invest each payment in an account that pays 10%.What will be the value in your account at the end of Year 30?

A perpetuity pays $550 at the end of every month.The PV of the perpetuity is $36,000.What is the monthly periodic rate on the perpetuity?

What is the future value of a 5-year ordinary annuity with annual payments of $200,evaluated at a 15% interest rate?

In three years you will begin receiving an annual payment of $600 that will be made for two years.If the annual interest rate is 12%,what will be the balance in your account at the end of the fourth year?

A perpetuity pays $550 at the end of every month.The PV of the perpetuity is $36,000.What is the effective interest rate (EIR)on the perpetuity?

Your uncle offers you a stream of payments whose present value,today,is $62,000.There are 15 equal annual payments in the stream.The first payment in the stream occurs seven years from today.If the interest rate is 14%,then what is the value of each payment?