Chapter 4: 22BP (page 283)
If you owe $35,000 payable at the end of eight years, what amount should your creditor accept in payment immediately if she could earn 13 percent on her money?
The creditor should accept $13,165.60 now.
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Rita Gonzales won the \(41 million lottery. She is to receive \)1.5 million a year for the next 19 years plus an additional lump sum payment of $12.5 million after 19 years. The discount rate is 14 percent. What is the current value of her winnings?
Question: Franklin Templeton has just invested \(9,260 for his son (age one). This money will be used for his son’s education 18 years from now. He calculates that he will need \)71,231 by the time the boy goes to school. What rate of return will Mr. Templeton need in order to achieve this goal?
At a growth (interest) rate of 10 percent annually, how long will it take for a sum to double? To triple? Select the year that is closest to the correct answer
Cal Lury owes $10,000 now. A lender will carry the debt for five more years at 10 percent interest. That is, in this particular case, the amount owed will go up by10 percent per year for five years. The lender then will require that Cal pay off the loan over the next 12 years at 11 percent interest. What will his annual payment be?
The preferred stock of Denver Savings and Loan pays an annual dividend of $5.70. It has a required rate of return of 6 percent. Compute the price of the preferred stock.
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