Answer:
Present Value= $15,874.25
Explanation:
Giving the following information:
Assume the real rate of interest is 3.00% and the inflation rate is 6.00%. What is the value today of receiving 14,488.00 in 13.00 years?
<u>This is a rare case where the interest rate is negative:</u>
Interest rate= 0.03 - 0.06= -0.03
Having said this, the present value is higher than the final value:
PV= FV/ (1+i)^n
PV= 14,488/ 0.97^3= $15,874.25
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Answer:
Bond price=$888.35
Explanation:
<em>The value of the bond is the present value (PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV) discounted at the yield rate</em>
<em>Value of Bond = PV of interest + PV of RV</em>
The value of bond for Local School District can be worked out as follows:
Step 1
PV of interest payments
PV = A × (1+r)^(-n)/r
A-annul interest payment:
= 7.5% × 1,000× = 75
r-Annual yield = 8.6%
n-Maturity period = 25
PV of interest payment:
=75× (1- (1+0.086)^(-25)/0.086)
= 761.22
Step 2
<em>PV of Redemption Value</em>
= 1000 × (1.017)^(-25)
= $127.131
Step 3
<em>Price of bond</em>
=761.222 + 127.13
=$888.35
The correct answer should be B) Small franchise owners enjoy a degree of control and can benefit from their support of the parent company
In a franchise, you're the owner of the shop, it's just that you work under licenses set by the parent company. Therefore, you're allowed to have some control such as employment or similar.
