Which type of computation would a person use to determine current value of a desired amount for the future?

An office building and its equipment are insured to $7,100,000. The present annual insurance premium is $0.85 per $100 of covera

andrew11 [14]

Answer:

a) 14.74%.

b) 13 years

Explanation:

a. Find the rate of return if the sprinkler system is installed.

P = -$18,000 - $360(P/A,i,20) + ($0.45)($7,100)(P/A,i,20)

= (P/A,i,20)=18000/2835 = 6.35

= $\frac{(1+i)^{20} -1 }{i(1+i)^{20}}$ = 6.35

Solving for i we get,

i =14.74%.

b. With interest at 12%, find the payout period for the sprinkler system.

P = -$18,000 - $360(P/A,12%,n) + ($0.45)($7,100)(P/A,12%,n)

(P/A,12%,n) = 18000/2835 = 6.35

= $\frac{(1+0.12)^{n} -1 }{0.12(1+0.12)^n}$ = 6.35

Using numerical solving to find the real roots of this equation (using a calculator, or Excel), we get n≅12.67 = 13 years. This means the payout period is about 13 years.

7 0

3 years ago

The law of large numbers says that when many people are insured, the probability distribution of the losses will assume a normal

Dahasolnce [82]

Answer:

allows accurate predictions.

Explanation:

The law of large numbers states that the larger the amount of policy holders, the probability distribution of the number of claims (losses for the insurance company) will be shaped like a normal distribution. This allows the companies to make more accurate predictions about the future number of claims.

In statistics, the law of large numbers states that as the sample size increases, the mean will be much closer to the real mean of the total population.

6 0

3 years ago

Joshua is retired. He lives on a fixed pension. His daughter Sue just bought a house. She has fixed rate of interest on her mort

Radda [10]

<h2>Joshua would lose and Sue would benefit from unanticipated inflation.</h2>

Explanation:

Both Joshua and Sue are associated with fixed pension and fixed interest respectively.
Now the value of money goes down due to inflation
So to live as usual, Joshua need to spend some extra money. But considering the fixed income, it's a lose to Joshua
Whereas Sue is associated with fixed interest of mortgage. She is benefited because, though the inflation has changed the value of all other products, but the fixed interest rate does not change.
"Fixed-rate mortgage holders are inflation winners", says "Thoma, professor of economics at the University of Oregon"

6 0

4 years ago

When sarah went to the hotel lobby for the free hot breakfast provided by the hotel, she found a poor selection of food that was

ratelena [41]

<span>This is due to inadequate customer service gap and mismanagement in catering section.There should be proper management in catering section and quality of food supplied must checked in timely manner. Good management and well catering services are essential needs of a good hotel.</span>

6 0

3 years ago

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time wor

SpyIntel [72]

Answer:

D. The size of the labour force will increase.

Explanation:

Switching over from part time to full time simply means either they are done with what makes them walk part time,or the work is demanding and the government decided to make them full time staffs,due to the availability of resources to cater for them.

More new part time individuals will be employed to take their place thereby creating jobs and falling the official unemployment rate.

4 0

3 years ago