All categories

1 year ago

What is the present value of an ordinary annuity of $500 a year for 6 years assuming an interest rate of 9%?.

Business

1 answer:

il63 [147K]1 year ago

7 0

PV = <u>$2,242.96</u>

The present value of an ordinary annuity of $500 a year for 6 years assuming an interest rate of 9% is<u> </u><u>$2,242.96</u>

<h3>What is the interest rate?</h3>

The fee that a lender assesses on a borrower is known as the interest rate, which is expressed as a percentage of the principal, or the loaned amount. Usually, the annual percentage rate (APR), which is how loans' interest rates are expressed, is noted (APR).

In its simplest form, interest is a charge imposed on the borrower for using a resource. Assets that have been lent include cash, goods, vehicles, and real estate. It is possible to think of higher interest rates as the "cost of money" because they make borrowing the same amount of money more expensive.

The majority of lending and borrowing transactions, therefore, involve interest rates. People take out loans to buy homes, finance initiatives, start or fund businesses, or cover college tuition. Businesses obtain loans to finance capital projects and grow their operations by acquiring long-term and fixed assets like real estate, buildings, and equipment. The repayment of borrowed funds can be made in one lump sum by a specific date or over the course of several payments.

Thus, $2,242.96 is the present value.

For more information on the Interest rates, refer to the given link:

brainly.com/question/13324776

#SPJ4

You might be interested in

Krisp Systems decides to move production to a developing country where they are free to pump pollutants into the atmosphere with

Delvig [45]

Answer:

Environmental hazards and underdevelopment

Explanation:

Aware of existing policies to curb the careless release of pollutant to the atmosphere, relocating to developing country's amounts to refusal to pay taxes, cutting corners in order to make more profits and reduction in additional cost to operations. But most importantly, the company is not a promoter of the eradication of environmental hazards.

4 0

3 years ago

A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the

iris [78.8K]

Answer:

10-Day 99% VaR = 3.61

Explanation:

Data Given:

For First Option:

Stock Price = 50

Strike Price = 51

Volatility = 28% per annum

Time to maturity = 9 months

For Second Option:

Stock Price = 20

Strike Price = 19

Volatility = 25% per annum

Time to maturity = 12 months or 1 year

Risk Free Rate = 6% per annum

Correlation = 0.4

Find 10-day 99% VaR.

Solution:

First of all we need to refer the DerivaGem Model to dig out the change in price equation for both the options.

So, according to DerivaGem Model, We have following data:

For First Option:

Value = -5.413

Delta Value = -0.589

For Second Option:

Value = -1.014

Delta = -0.284

Change in Price = (Delta value of First Option x Stock Price)Y1 + (Delta value of the second option x Stock Price)Y2

Change in Price = (-0.589 x 50)Y1 + (-0.284 x 20)Y2

So, We will get the Change in Price Linear Equation for both the options.

Change in Price = -29.45Y1 -5.68Y2

Now, we have to calculate the Daily Volatility Percentage.

Formula:

Daily Volatility Percentage = Volatility/ Square root of number of days active in annum

Number of Days Active = 252

Volatility for First Option = 28%

Volatility for Second Option = 25%

Daily Volatility Percentage for First Option = 28%/ $\sqrt{252}$

Daily Volatility Percentage for First Option = 0.0176

Similarly,

Daily Volatility Percentage for Second Option = 25%/ $\sqrt{252}$

Daily Volatility Percentage for Second Option = 0.0157

Now, utilizing the above calculated data, we can find the one-day variance of change in price.

1-Day Variance = $(29.45^{2} *0.0176^{2}) + (5.68^{2} * 0.0157^{2}) - (2 * 29.45 * 0.0176 * 5.68 * 0.0157 * 0.4)$

Solving the above equation:

We get:

1-Day Variance = 0.2396

Now, we have to find the standard deviation of 1-Day Variance:

SD of 1-Day Variance = $\sqrt{0.2396}$

SD of 1-Day Variance = 0.4895

So,

Now, in order to find the value of one day 99% VaR from the table, we have all the prerequisites.

So,

Value of One day 99% VaR from table = 2.33

But we need 10-Day 99% VaR.

So, number of days = 10

Hence,

10-Day 99% VaR = $0.4895 * 2.33 * \sqrt{10}$

10-Day 99% VaR = 3.61

8 0

3 years ago

On October 10, the stockholdersâ€™ equity of Sherman Systems appears as follows.

aniked [119]

Answer:

Sherman Systems

1. Journal Entries

Debit Credit

a) October 11:

Treasury Stock $68,000

Additional Paid-in Capital $224,400

Cash $292,400

To record purchase of 6,800 shares at $43 per share.

b) November 1:

Cash $71,050

Treasury Stock $14,500

Additional Paid-in Capital $56,550

To record sale of 1,450 treasury shares at $49 per share.

c) November 25:

Cash $203,300

Treasury Stock $53,500

Additional Paid-in Capital $149,800

To record sale of 5,350 treasury shares at $38 per share.

2. Revised Equity Section of Sherman Systems' Balance Sheet as at October 11:

Common stock at“$10 par value,

90,000 shares authorized, issued, and outstanding $ 900,000

Paid-in capital in excess of par value, common stock 81,600

Treasury Stock (68,000)

Retained earnings 1,008,000

Total stockholders' equity $1,921,600

Explanation:

1. Additional Paid-in Capital:

Balance on October 10 $306,000

Treasury Stock ($224,400)

Balance on October 11 $81,600

2. Treasury Stock is a contra account to Common Stock. It represents the purchase of its own shares by a company. There are two methods for accounting for treasury stock. One is the par value method, where the adjustments for above or below par value are made in the Additional Paid-in Capital account. The other method is the costing method, where the adjustments for above or below par value are made in the Treasury stock.

3. The equity section prepared above is limited to the October 11 transaction. The transactions occurring on November 1 and 25 were not required by the question.

4. The remaining shares of the treasury stock reissued on November 25 is equal to 6,800 - 1,450 = 5,350 shares.

3 0

3 years ago

The paying of a fee to use another firm�s name, resources, and operating systems is called __________.

s344n2d4d5 [400]

Franchising is the practice of paying a company to use its name, resources and operation systems.

7 0

4 years ago

What role does budget play and why exhibiting responsible money management behavior is important to reaching future financial go

larisa [96]

Answer:

Some entities will follow a top-down mandatedapproach to budgeting. These budgets will begin with upper-level management establishing parameters under which the budget is to be prepared. These parameters can be general or specific. They can cover sales goals, expenditure levels, guidelines for compensation, and more. Lower-level personnel have very little input in setting the overall goals of the organization.

Explanation:

7 0

3 years ago