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VladimirAG [237]
2 years ago
12

An uncle of yours who is about to retire wants to sell some of his stock and buy an annuity that will provide him with income of

$50,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost him to buy such an annuity today?
Business
1 answer:
lions [1.4K]2 years ago
8 0

Answer:

It should cost $605,183.13 today.

Explanation:

Giving the following information:

Cash flow= $50,000

Number of years= 30

Interest rate= 7.25%

To calculate the present value, first, we need to calculate the final value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= cash flow

FV= {50,000*[(1.0725^30)-1]} / 0.0725

FV= $4,940,897.47

Now, we can calculate the present value:

PV= FV/(1+i)^n

PV= 4,940,897.47/ (1.0725^20)

PV= $605,183.13

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Explanation:

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8 0
3 years ago
Select the examples of Energy workplaces. mines, power plants, refineries, schools, trains, warehouses, stores, offices.
VashaNatasha [74]

Answer: Mines, Power Plants, Refineries, Office

Explanation: I just took the assignment good luck!

3 0
3 years ago
Read 2 more answers
Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,
hoa [83]

Answer:

The annualized rate of return to the Swiss investor is -7.93%.

Explanation:

This is an instance of foreign currency bond.

Using the exchange rate of $1 = 1.420, purchase price of the bond is calculated as $9,708.74 x 1.420 = 13,786.4108 Swiss Francs

Using the exchange rate of $1 = 1.324, maturity value is $10,000 x 1.324 = 13,240 Swiss Francs

Holding period is 6 months.

So, annualized rate of return is: (Maturity amount - Purchase price)/Purchase price x 12 / No of months

Annualized rate of return is: (13,240 - 13,786.4108)/13,786.4108 x 12/6 = -0.079268028.

Annualized rate of return is -7.93% approximately.

3 0
2 years ago
Blowing Sand Company has just received a one-time offer to purchase 10,000 units of its Gusty model for a price of $22 each. The
VLD [36.1K]

Answer:

a. Accept the order

b. Increase in short-term profit of $50,000

Explanation:

<em>Note : Blowing Sand has "enough excess capacity" this means that fixed cost will be the same in the range or they will be ocurred whether or not the special order is accepted.</em>

Therefore fixed costs are Irrelevant for this decision.

<u>Incremental Costs and Revenues - accept the special order</u>

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<em>Less</em> Variable Costs ( 10,000 units × $17each)         ($170,000)

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The special order will result in an increase in short term profit of $50,000. Therefore, Blowing Sand Company should accept the order.

8 0
3 years ago
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Answer:

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Explanation:

The computation of the present value is shown below:

As we know that

Future value = Present value × (1 + rate of interest)^number of years

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So, the present value is $88,087.08

hence, the present value is $88,087.08

7 0
2 years ago
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