Directions for Submitting Your Instructor Graded Assignment You must show your work on all problems. You may type your answer right into this document. Total points for project: 45 points. Projects must be submitted as a Microsoft Word document and uploaded to the Dropbox for Unit 7. All Projects are due by Tuesday at 11:59 PM ET of the assigned Unit. NOTE: Project problems should not be posted to the Discussion threads. Questions on the project problems should be addressed to the instructor
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job with a local bank. As part of its evaluation process‚ you must take an examination on time value of money analysis covering the following questions: a. Draw time lines for (1) a $100 lump sum cash flow at the end of Year 2; (2) an ordinary annuity of $100 per year for 3 years; and (3) an uneven cash flow stream of -$50‚ $100‚ $75 and $50 at the end of Years 0 through 3. (1) 100 0 1 2 100 0 1 2 (2) I%I% I%I% (3) 100 50 75 0 1 2 3 -50 100 50 75 0 1 2 3 -50
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indifferent? Solution P = Sn (1+r)n P = 1464.10 = 1000 1.4691 P = Sn(1) PVIF r%‚ n yrs = 0.683 PVIF r%‚ n yrs Using Tables = Sn x PVIF r%‚ n yrs iii/ Compound or Future Value of An Annuity An annuity is a series of
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2. Which one of the following statements is correct? A. The future value of an annuity is unaffected by the amount of each annuity payment. B. The present value of an annuity is unaffected by the number of the annuity payments. C. The present value of an annuity increases when the interest rate decreases. D. The present value of an annuity increases when the interest rate increases. E. The future value of an annuity increases when the interest rate decreases. 4. A debenture is: A. long-term debt
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tax-deferred basis. 14) Annuity is a financial contract that provides annual payments over a specified period. The difference between a fixed annuity and a variable annuity is that fixed annuity returns are based on initial investment and variable annuity returns are based on performance of investment. Fixed annuity is best for a short amount of time while variable annuity does not guarantee a specific return over time‚ making it best for long periods.The main disadvantage of annuity is the high fees associated
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recognize how annuities (a set of fixed payments over a specified length of time) affect the TVM‚ managers need to consider the factors of interest rates‚ opportunity cost‚ future and present values of the money‚ and compounding. In this paper‚ I will explain how annuities affect TVM problems and investment outcomes. I will also address the impact of the following on TVM; interest rates and compounding‚ present value‚ opportunity cost‚ and annuities as well as the Rule of 72. How do annuities affect TVM
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Lecture 3~4 Exercise Problems and Questions. 1. Calculating Annuity Present Values. An investment offers $8‚500 per year for 15 years‚ with the first payment occurring 1 year from now. If the required return is 9 percent‚ what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? 2. Calculating Annuity Cash Flows. If you put up $25‚000 today in exchange for a 7.9 percent‚ 12year annuity‚ what will the annual cash flow be? 3. Calculating Perpetuity
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FIN B280 Introduction to Financial Management │Unit 1│ Scope and Concepts © The Open University of Hong Kong Unit 1 1 FIN B280 Introduction to Financial Management Unit Overview Financial Objective of a Firm Agency Problem Time Value of Money Making interest rates comparable Effect of taxes on financial decision making © The Open University of Hong Kong Unit 1 2 FIN B280 Introduction to Financial Management Financial Objective of a Firm © The Open University of Hong
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Both approaches are straightforward extensions of our earlier analysis of single cash flows. 2. A series of constant cash flows that arrive or are paid at the end of each period is called an ordinary annuity‚ and we described some useful shortcuts for determining the present and future values of annuities. 3. Interest rates can be quoted in a variety of ways. For financial decisions‚ it is important that any rates being compared be first converted to effective rates. The relationship between a quoted
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Yet‚ the US economy is suffering through declining home values‚ a banking crisis‚ and an uncertain stock market. So‚ what would an increase in the interest rate mean for consumer financing for big-ticket items‚ the present and future values of annuities; net present values‚ weighted average costs of capital‚ and corporate earnings? Cost of Capital The cost of capital can be measured in a variety of ways. One may look at short- and long-term debt where payments will rise as interest rates rise
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