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Question;6-6;FUTURE VALE OF AN ANNUITY;WHAT;IS THE FUTURE VALUE OF A 5-YEAR ORDINARY ANNUITY THAT PROMISES TO PAY YOU;$300 EACH YEAR? THE RATE OF INTEREST;IS 7 PERCENT.;6-7;FUTURE VALUE OF AN ANNUITY;DUE;6-8;PRESENT AND FUTURE VALUE OF;A CASH FLOW STREAM;An;investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at;the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6.;IF;THE INTEREST RATE EARNED ON THE INVESTMENT IS 8 PERCENT, WHAT IS ITS PRESENT;VALUE? WHAT IS ITS FUTURE VALUE?;6-9;LOAN AMORTIZATION AND;EFFECTIVE INTEREST RATE;You;are thinking about buying a car, and a local bank is willing to lend you;$20,000 to buy the car. Under the;terms of the loan, it will be fully amortized over 5 years (60 months), and;the nominal rate of interest will be 12 percent, with interest paid;monthly.;WHAT;WOULD BE THE MONTHLY PAYMENT ON THE LOAN?;WHAT WOULD BE THE EFFECTIVE RATE OF INTEREST ON THE LOAN?;6-10;GROWTH RATES;Shalit;Corporation?s 2002 sales were $12 million.;Sales were $6 million 5 years earlier (in 1997).;(a.);TO;THE NEAREST PERCENTAGE POINT, AT WHAT RATE HAVE SALES BEEN GROWING?;(b.);Suppose;someone calculated the sales growth for Shalit Corporation in part (a) as;follows: ?Sales doubled in 5;years. This represents a growth of 100;percent in 5 years, so, dividing 100 percent by 5, we find the growth rate to;be 20 percent per year.?;EXPLAIN;WHAT IS WRONG WITH THIS CALCULATION.;="msonormal">;WHAT;IS THE FUTURE VALUE OF A 5-YEAR ANNUITY DUE THAT PROMISES TO PAY YOU $300;EACH YEAR? ASSUME THAT ALL PAYMENTS;ARE REINVESTED AT 7 PERCENT A YEAR, UNTIL YEAR 5.;="msonormal">

Paper#51224 | Written in 18-Jul-2015

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