Jason just joined a new gym and signed up for a one-year membership. Membership fees can be paid in 12 monthly payments of $50,
due at the beginning of each month or in one payment today. If the appropriate interest rate is 11%,.How much should he pay today for the annual membership?
1 answer:
Answer:
$570.91
Explanation:
For computing, the amount pay today for the annual membership we just need to apply the present value formula i.e to be shown in the attachment
Provided that
Future value = $0
Rate of interest = 11% ÷ 12 months = 0.916666%
NPER = 12 months
PMT = $50
The formula is shown below:
= PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the amount paid today for the membership is $570.91
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Answer:
10,064 bonds
Explanation:
Given:
Amount to be raised = $2,800,000
Par value (FV) = $1,000
Maturity (nper) = 20×2 = 40 periods
Yield (rate) = 6.49 ÷ 2 = 3.245% or 0.03245
Coupon payment is 0 as it's a zero coupon bond.
Assume it's compounded semi-annually.
Calculate the price of the bond today using spreadsheet function =PV(rate,nper,pmt,FV)
Price of bond is $278.23
PV is negative as it's a cash outflow.
Number of bonds to be sold = Total amount to be raised ÷ Price of bond
= 2,800,000 ÷ 278.23
= 10,064 bonds
Company should sell 10,064 bonds to raise $2.8 million
