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Arte-miy333 [17]
3 years ago
13

Your friend offers to pay you an annuity of $2,500 at the end of each year for 3 years in return for cash today. You could earn

5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
Business
1 answer:
VladimirAG [237]3 years ago
3 0

Answer:

Annuity per period (A) = $2,500

Interest rate (r) = 5.5% = 0.055

Number of years (n) = 3 years

Present value (PV) = ?

The amount to be paid for the annuity

PV = A<u>(1 + r)</u>n - 1

             r

PV = $2,500<u>(1 + 0.055)</u>3 -  1

                       0.055

PV = $2,500<u>(1.055)3 - 1</u>

                       0.055

PV = $2,500<u>(1.174241375 - 1)</u>

                        0.055

PV = $2,500 x 3.168025

PV = $7,920.06

Explanation:

The present value of an annuity equals annuity per period multiplied by present value of annuity factor at 5.5% for 3 years. In this case, the annuity per period, interest rate and number of years were provided in the question with the exception of present value. The present value becomes the subject of the formula.                  

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If the company were to issue an annual zero-coupon bond with a maturity of 2 years and par value of $1,000, what would be the ar
Firdavs [7]

Answer:

Note: <em>The complete question is attached as picture below</em>

1a. The one year spot rate can be calculated using the one year zero bond.

PV * (1 + S1) = FV

1 + S1 = 1000 / 900

S1 = 1.1111 - 1

S1 = 0.1111  

S1 = 11.11%

1b. PV of the 2 year bond = $950

Annual coupon = 1000 * 5% = $50

950 = 50 / (1 + S1) + (50 + 1000) / (1 + S2)^2

950 = 50 / 1.1111 + 1,050 / (1 + S2)^2

1,050/ (1 + S2)^2 = 950 - 45 = 905

(1 + S2)^2 = 1050 / 905

1 + S2 = 1.160221/2

S2 = 7.714%

1c. Price of the 2 year zero bond = 1,000 / (1 + 0.07714)^2

Price of the 2 year zero bond = 1,000 / 1.1602

Price of the 2 year zero bond = 861.9203586

Price of the 2 year zero bond = $861.92

3 0
3 years ago
Cost of goods sold is given by:
icang [17]

Answer:

b. Net Purchases + beginning inventory - ending inventory.

Explanation:

The formula to compute the cost of goods sold is shown below:

Cost of good sold = Beginning inventory + net purchase - ending inventory

We simply added the net purchase and deduct the ending inventory to the beginning inventory so that the correct value can be determined

It records that cost which is directly related to the product that means it excludes the indirect cost

8 0
3 years ago
The percent change in multifactor productivity if Fok can reduce the energy bill by ​$1,000 per day without cutting production o
marishachu [46]

Answer:

The answer is "2.45%".

Explanation:

The answer of option c:

Reduce power by 950 dollars:

In this question it will need to once again take the latest energy cost for analytical hierarchical productivity.  

→ Total Input  = 400 \times  12+21000 \times 1 +(5000-950)+10000

                     = 4800 +21000 + (4050)+10000  \\\\                       = 25800+4050+10000 \\\\                       = 39850\\

Consumer rates  = \frac{1,000}{39,850}

                            =0.0250

Initial efficiency multi-factor= 0.0245

\to \text{percentage  changes} = \frac{\text{New Multi Factor Productivity - Previous Multi-Factor Productivity}}{\text{Originbal Multi-Factor Productivity}}  

                                   = \frac{(0.02450.0251)}{0.0245}\\\\ = 2.45 \ \  \%

3 0
3 years ago
Suppose that the money supply and the nominal GDP for a hypothetical economy are $96 bilion and $336 bilion, respectively. (In p
Alina [70]

Answer:

V = 3.5  (1 dollar circulates 3.5 times in a year)

In short term – Reduction of aggregate demand and real output

In long term – reduction of wages and increase of real output of firms

Nominal GDP will fall by $20 bilion

Explanation:

Equation of monetisation =  

Total money in circulation = Total money demanded/total output

Money Supply * Money Velocity = Price Level * GDP

V = PY/M  

Substituting the given values, we get –  

V = 336/96  

V = 3.5  

This indicates 1 dollar circulates 3.5 times in a year

In short term – Reduction of aggregate demand and real output

In long term – reduction of wages and increase of real output of firms

Nominal GDP will fall by $20 bilion

7 0
3 years ago
Assume that an economy produces only two goods, pizza and wings. Place the events in order, to show how an improvement in pizza-
marysya [2.9K]
The population of the animals would decrease but more chicken wings and pizza would be everywhere which is great Bc who doesn’t like pizza and chicken wings
4 0
3 years ago
Read 2 more answers
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