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DanielleElmas [232]
3 years ago
8

You plan on making a $235.15 monthly deposit into an account that pays 3.2% interest, compounded monthly, for 20 years. At the e

nd of this period, you plan on withdrawing regular monthly payments. Determine the amount that you can withdraw each month for 10 years, if you plan on not having anything in the account at the end of the 10 year period and no future deposits are made to the account.
Business
1 answer:
erma4kov [3.2K]3 years ago
8 0

Answer:

Monthly payment = $769.27

Explanation:

First we have to determine the future value of the ordinary annuity:

Payment = $235.15

N = 20 * 12 = 240

Rate = 3.2% / 12 = 0.267%

Using a financial calculator and the FV function, the FV = $78,910.41

Again, using the financial calculator or Excel, you can determine the monthly payment:

N = 10 / 12 = 120

Rate = 0.267%

PV = $78,910.41

FV = $0

Monthly payment = $769.27

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Answer:

The correct option is Dana might be indifferent between C, A, and B.

Explanation:

Note: See the attached photo for the indifference curve showing points A, B and C.

The answer can be explained using an indifference curve.

An indifference curve is a graph that depicts the combination of two commodities that provide equal satisfaction or utility to the consumer. A consumer is indifferent between the two commodities at each point on an indifference curve because all points on the curve provide him with the same level of satisfaction or utility.

In the attached photo, bundles A, B and C are plotted as points on the same indifference curve (IC). Since points A, B and C are on the same IC, it therefore implies that Dana might be indifferent between C, A, and B.

Therefore, the correct option is Dana might be indifferent between C, A, and B.

4 0
3 years ago
Handy Man, Inc., has zero coupon bonds outstanding that mature in eight years. The bonds have a face value of $1,000 and a curre
AnnZ [28]

Answer:

5.657%

Explanation:

Data provided:

Face value = $1,000

Current market price = $640

Time of maturity, t = 8 year

Now,

the compounding formula is given as:

Face value = Current amount × (1+\frac{r}{n})^{nt}

where,

r is the rate i.e pretax rate of debt

n is the number of times the interest is compounded i.e for semiannual n = 2

thus, on substituting the values, we get

$ 1,000= $ 640 × (1+\frac{r}{2})^{2\times8}

or

1.5625 = (1+\frac{r}{2})^{16}

or

(1+\frac{r}{2}) = 1.0282

or

r = 0.05657

or

pretax cost of debt = 0.05657 × 100% = 5.657%

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Answer:

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