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Nutka1998 [239]
4 years ago
6

You are considering two savings options. Both options offer a rate of return of 11 percent. The first option is to save $2,500,

$1,500, and $3,000 at the end of each year for the next three years, respectively. The other option is to save one lump sum amount today. You want to have the same balance in your savings account at the end of the three years, regardless of the savings method you select. If you select the lump sum method, how much do you need to save today
Business
1 answer:
Tpy6a [65]4 years ago
8 0

Answer:

Lump sum= $5,663.26

Explanation:

Giving the following information:

Both options offer a rate of return of 11 percent.

The first option is to save $2,500, $1,500, and $3,000 at the end of each year for the next three years.

We need to determine the lump sum required to equal the final value of the first option.

First, we need to calculate the final value of the first option:

FV= PV*(1+i)^n

FV= 2,500*1.11^2 + 1,500*1.11 + 3,000= $7,745.25

We can calculate the lump sum using the same formula, but isolating PV:

PV= FV/(1+i)^n

PV= 7,745.25/1.11^3= $5,663.26

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cannibalization

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For example, Coke Zero cannibalized the sales of Diet Coke and regular Coke.

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3 years ago
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The appropriate discount rate for the following cash flows is 8 percent compounded quarterly.
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Answer:

Total PV= $2,736.39

Explanation:

Giving the following information:

Year Cash Flow

1 $ 870

2 950

3 0

4 1,540

<u>First, we need to calculate the real annual discount rate:</u>

Quarterly Discount rate= 0.08/4= 0.02

Real annual interest rate= [(1+i)^n] - 1

Real annual interest rate= [(1.02^4) - 1]

Real annual interest rate= 0.08243

<em><u>Now, we can calculate the present value of the cash flows:</u></em>

PV= Cf/(1+i)^n

Year 1= 870/1.08243= 803.75

Year 2= 950/1.08243^2= 810.82

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7 0
3 years ago
Moral hazard occurs when:
satela [25.4K]
1) Moral hazard occurs when the individual does not tell the others all the risks associated with their actions, so the correct answer is:
D. an individual knows more about his or her actions than other people do.

for the second one:

the money lent will be x

so we have :

x+10%x=1000
(the money lent and the interest are 1000 together)

so: 110%x=1000

\frac{110}{100} x=1000

\frac{11}{10} x=1000
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x=909.09 - so they correct answer is A!

x=


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katen-ka-za [31]

Answer:

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Explanation:

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