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kompoz [17]
2 years ago
12

You are offered Birr 1,000 today, Birr 10,000 in 12 years, or Birr 25,000 in 25 years. Assuming that you can earn 11 percent on

your money, which offer should you choose?
Business
1 answer:
Usimov [2.4K]2 years ago
4 0

Based on the amounts that you are offered and their present values, the offer you should pick is Birr 10,000 in 12 years.

<h3>Which offer should you pick?</h3>

You should pick the offer with the highest present value.

Offer 1 present value:

= Birr 1,000

Offer 2 present value:

= 10,000 / (1 + 11%)²

= Birr 2,858

Offer 3 present value:

= 25,000 / (1 + 11%)³

= Birr 1,840

In conclusion, option 2 has the highest present value and so should be picked.

Find out more on present value calculations at brainly.com/question/27821989.

#SPJ1

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The board of governors of the federal reserve system can increase commercial bank reserves by
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3 0
3 years ago
On January 1, 2021, Pence Airlines issued $400,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is pay
finlep [7]

Answer:

1) the price of the bonds can be determined by calculating the PV of the face value and coupon payments:

PV of face value = $1,000 / 1.05⁴⁰ = $142.05

PV of coupon payments = $40 x 17.159 (PV annuity factor, 5%, 40 periods) = $689.36

PV of each bond = $831.41 x 400 = $332,564

January 1, 2021, bonds issued at a discount

Dr Cash 332,564

Dr Discount on bonds payable 67,436

    Cr Bonds payable 400,000

2) amortization of bond discount = (332,564 x 5%) - 16,000 = $628.20 ≈ $628

June 30, 2021, first coupon payment

Dr Interest expense 16,628

    Cr Cash 16,000

    Cr Discount on bonds payable 628

3) amortization of bond discount = (333,192 x 5%) - 16,000 = $659.60 ≈ $660

December 31, 2021, first coupon payment

Dr Interest expense 16,660

    Cr Cash 16,000

    Cr Discount on bonds payable 660

4) bonds carrying value on December 31, 2021 = $333,852 - $335,000 = $1,148

December 31, 2021, adjusting entry for bonds' fair market value

Dr Unrealized loss on bonds' fair value 1,148

    Cr Fair value adjustment 1,148

4 0
3 years ago
Ten years ago, a smoothle at Kay's Smoothies cost $1.25. Today it costs $2.00. In order to attribute this price increase of smoo
Papessa [141]

Answer:

OD. The price of other products would need to have increased.

Explanation:

Inflation is defined as the decline of the purchasing power of a particular currency over a period of time. Which means that if a product cost $1 last two years and now costs $2 now, and its effect is also felt among other commodities, then inflation is confirmed as it is not limited to a particular product.

Therefore, if ten years ago, a smoothie at Kay's Smoothies cost $1.25 and today it costs $2.00, in order to attribute this price increase of smoothies at Kay's to inflation, the price of other products would need to have increased.

7 0
3 years ago
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