Answer:
$28,216
Explanation:
The computation of the minimum amount that you will accept today i.e present value is shown below:
Year Cash flows Discount factor Present value
1 $10,000.00 0.9259259259 $9,259.26
2 $11,000.00 0.8573388203 $9,430.73
3 $12,000.00 0.793832241 $9,525.99
Total present value $28,215.97
The discount factor should be computed by
= 1 ÷ (1 + rate)^years
Answer:
The value of the option to wait is $0.70,option A.
Explanation:
In calculating the value of the option to wait,I discounted all cash flows under both alternatives, using the discount rate of 12% as given in the question.
Option to start now gives net present value(positive return ) of $360.64 while the other one gives $361.34,invariably option to wait one year gives $0.70($361.34-$360.64) more than the option to start now.
The formula used in the calculating present value is PV=FV(1+r)^n
Where PV=present value
FV=future value
r=rate of interest
n=number of year
Find attached spreadsheet for detailed calculations.
Answer: sell covered calls
Explanation:
A retired customer that has a portfolio of blue chip stocks is looking to supplement his retirement income. An appropriate recommendation would be to sell covered calls.
It should be noted that a covered call is a financial transaction that takes place when a call option is sold by an investor even though the investor still owns part of the security based on what's sold.
Answer:
$18,910.00
Explanation:
Monthly rent $1240
Extra monthly charge $160
Electricity $90
Other utilities $860 per year
Insurance $170 per year
The monthly rent per year will be
=$1240 x 12
=$14,880
Parking charges per year
=$160 x 12
=$1,920
Electricity charges per year
=$90 x 12
=$1,080
Other utilities per year
=$860
Insurance per year
=$170
The annual cost will be
=$14,880 + $1,920 + $1,080 + $860 + $170
=$18,910.00
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