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Alenkinab [10]
3 years ago
8

You just won a lottery prize of $95,000. While you plan to use some of the sum to pay off your student loans, you would like to

have a total of $100,000 saved in an account in 8 years. After paying off some of the principal on your student loans, you plan to deposit the money left over in an account earning 2% interest, compounded annually. How much money can you spend today and still achieve your goal of having $100,000 at the end of 8 years?
Business
2 answers:
Evgesh-ka [11]3 years ago
8 0

Answer:

Principal Amount needed to get $100000 at end of 8 years = $ 85470

Prospective Spending out of $ 95000 prize = $9530  

Explanation:

Compound Interest Total Amount formula with Principal & 'n' period of times, compounding 't' times in a time period n.

A = P [1 + r/n] ^ nt

100,000 = P [1+ 0.02 / 1] ^ (8x1)

100,000 = P [(1.02)^ 8]

100,000 = P [1.17]

P = 100,000 / 1.17

P = $ 85470  [Principal Amount needed to get $100000 at end of 8 years]

Prospective Spending  = Prize Amount - Principal amount needed

95000 - 85470

= $ 9530

8_murik_8 [283]3 years ago
7 0
You put 85,000 into your account for 8 years and add $1250 each year into your account. At the end of the 8 years you will have a 11
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8 0
3 years ago
Read 2 more answers
On October 10, the stockholders’ 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
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hram777 [196]

Answer:

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<em><u>Please refer diagram</u></em>

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Delvig [45]
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the opportunity cost is 120 dollars
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