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SashulF [63]
2 years ago
8

You buy an annuity which will pay you $12,000 a year for ten years. The payments are paid on the first day of each year. What is

the value of this annuity today at a 7% discount rate?
Business
1 answer:
Kruka [31]2 years ago
7 0

Answer:

PV of annuity due = $90,182.8 (Approx.)

Explanation:

Given:

Payment per year = $12,000

Number of year = 10

Interest rate = 7% = 0.07

Find:

PV of annuity due

Computation:

PV of annuity due = P + P[{1-(1+r)⁻⁽ⁿ⁻¹)/r]

PV of annuity due = 12,000 + 12,000[{1-(1+0.07)⁻⁽¹⁰⁻¹)/0.07]

PV of annuity due = $90,182.8 (Approx.)

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Helmert Federal, a financial institution, acquires its funds primarily from the deposits of its customers, and then uses these f
Viefleur [7K]

Answer:

Savings and loan association

Explanation:

Since, Helmert Federal, acquires its funds primarily from the deposits of its customers, and then uses these funds to make mortgage loans for individuals interested in purchasing real estate properties.Therefore we can say that

Helmert Federal is a Savings and loan association

8 0
2 years ago
Assume that the risk-free rate is 6% and the market risk premium is 8%.
valkas [14]

Answer:

r or expected rate of return - market = 0.14 or 14%

r or expected rate of return - stock = 0.2120 or 21.20%

Explanation:

Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.  

The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the market risk premium

Under CAPM, the assumption follows that the beta of the market is always equal to 1.

So, expected return on the stock market will be,

r or expected rate of return - market = 0.06 + 1 * 0.08

r or expected rate of return - market = 0.14 or 14%

The beta of the stock is given. We calculate the required rate of return on the stock to be,

r or expected rate of return - stock = 0.06 + 1.9 * 0.08

r or expected rate of return - stock = 0.2120 or 21.20%

4 0
2 years ago
Malcolm has been researching reports generated by government agencies and the local chamber of commerce. What kind of research i
Yanka [14]
The answer is D personal
3 0
3 years ago
Discuss the propriety of showing: a) treasury stock as an asset - b) ""gain"" or ""loss"" on sale of treasury stock as additions
r-ruslan [8.4K]

Answer:

a. Treasury stock cannot be shown as an asset because a company cannot buy itself.

b) Gain or loss on sale of treasury stock is not to be treated as income, it should be added or subtracted from share capital because it is a capital transaction.

c). Treasury stock is not an asset. Dividends received from treasury stock cannot be treated as income, it is only assets that generates income.

Explanation:

When corporations for some strategic reasons and the desire to maintain and stabilize the shareholders wealth decide to buy back some of its shares, that is what is known as treasury stock. It is also called reacquired stock

a. The treasury stock is like a corporation acquiring itself, so it cannot be shown as an asset, it is only a reclassification within the same balance sheet.

b. Gains or loss on sale of treasury stock is not an income transaction, it is a transaction that affects the share capital of the corporation and must be charged to the share capital not the income.

c. Since treasury stock is not an asset, dividend received on treasury stock is not to be treated as income, it is only assets that generates income. it should affect retained earnings.

6 0
3 years ago
Red Hot Chili Peppers Co. had the following activity in its most recent year of operations.Classify the items as (1) operating—a
lora16 [44]

Answer:

a. Purchase of Equipment  - (3) investing

b. Redemption of bonds payable  - (4) financing

c. Sale of building  - (3) investing

d. Depreciation  - (1) operating—add to net income;

e. Exchange of equipment for furniture  - (5) significant noncash investing and financing activities

f. Issuance of capital stock  - (4) financing

g. Amortization of intangible assets  - (1) operating—add to net income

h. Purchase of treasury stock  - (4) financing

i. Issuance of bonds for land - (5) significant noncash investing and financing activities

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.  

The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.

7 0
3 years ago
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