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SSSSS [86.1K]
3 years ago
11

You are considering buying a perpetuity contract from your insurance company that will pay you $500 annually where the payment w

ill grow by 3% each year. Using a discount rate of 9%, the most you should be willing to pay for this contract is closest to:
Business
1 answer:
miss Akunina [59]3 years ago
3 0

Answer:

Maximum Amount Payable = $8333.33

Explanation:

Perpetual Annuity Payment = $500

Growth Rate = 3%

Discount Rate = 9%

Maximum Amount Payable = Present Value of Perpetual Annuity

Present Value of Perpetual Annuity =  Perpetual Annuity Payment / (Discount rate - Growth rate)

Maximum Amount Payable = $500 / (0.09 - 0.03)

Maximum Amount Payable = $500 / 0.06

Maximum Amount Payable = $8333.33

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If the demand for money is $100 billion and the supply of money is $200 billion, then the interest rate will: fall. rise. remain
Alik [6]

Answer:

fall

Explanation:

The situation above can be best explained by using the "Liquidity Preference Theory." According to the theory when money supply increases (as in the situation above), the interest rate falls. So, this means that many people will be more willing to invest, thereby resulting to a higher income. On the contrary, if the money supply decreases, the interest rate rises. This may temporarily increase the employment condition, however, it can lead to inflation in the long-run.

So, this explains the answer.

7 0
3 years ago
During January 2020 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 we
ira [324]

Answer:

Expenditures-2020 in the amount of $200

Explanation:

General fund supplies made last year were an estimated amount of $2000 was spent. So for last year there would have been a debit and credit leg for this transaction as.

In the present year 2020 it was received at an actual cost of $2,200. The excess cost (2,200-2,000= $200) must be recognised.

So the debit is passed into expenditures for this year 2020 for amount $200.

5 0
3 years ago
Carlos worked 40 hours last week. His hourly rate is $9.14. What did he earn last week
liraira [26]

Answer:

367.2

Explanation:

IM NOT SURE IF ITS CORRECT

8 0
3 years ago
Read 2 more answers
An article in Forbes noted that the Intercounty Connector toll road that connects two counties in Maryland was not generating
Roman55 [17]

Answer:

The price elasticity of demand

Explanation:

you need to know how high the demand is for the toll road.

3 0
3 years ago
The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital asset pricin
antiseptic1488 [7]

Answer:

D. 0.132

Explanation:

Calculation for the expected rate of return

Expected rate of return = 6% + 1.2(12 - 6)

Expected rate of return=6%+1.2(6)

Expected rate of return =6%+7.2

Expected rate of return = 13.2%

Therefore the expected rate of return on security X with a beta of 1.2 is equal to: 13.3%

8 0
3 years ago
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