User Account

All Pages

Reinvest all payments in an account earning

Assignment Help Finance Basics
Reference no: EM132460613

Problem: Jack and Diane are lottery winners! The prize is 20 consecutive annual payments of $50,000 beginning one year from today. For part a and b, draw the timeline, identify the five elements of the time value of money, and solve the question using a calculator.

a) Jack looks at Diane and says "can you believe it, us as millionaires today". Are they? Use an interest rate of 5%. (Find Present Value)

b) Jack and Diane decide to wait until the end of year 20 to spend the money, preferring to reinvest all payments in an account earning 5%. How much will they have at the end of year 20?

c) As a bonus, the fifth payment and only the fifth payment includes an extra $25,000 so that the amount received at the end of year 5 is $75,000. Jack looks at Diane and says "can you believe it; us, millionaires after 20 years." Are they? Use an interest rate of 2%. Draw the timeline and use calculator for this question.

Reference no: EM132460613

Questions Cloud

Show the probability of insolvency of the insurer : The claim cost of an insurance company follows a normal distribution with an expected value of $500 million and a standard deviation of $100 million.
Standard deviation of the optimal risky portfolio : With careful estimation and calculation, the manager found that the optimal proportions of each asset in the optimal risky portfolio are as follows:
How do you account for the difference : Family A's income is more than twice that of Family B, yet Family B has more equity. How do you account for the difference?
Determine and analysis the free trip to the destination : Determine and analysis the free trip to the destination, need to budget for your expenses during the 3 days, because want to be able to buy
Reinvest all payments in an account earning : Jack and Diane are lottery winners! The prize is 20 consecutive annual payments of $50,000 beginning one year from today.
What is the beta of yerba stock after transaction : What is the beta of Yerba stock after this transaction? What is the expected return of Yerba stock after this transaction?
Determine the payroll processing system at no-wear product : Prepare a context diagram and Level 1 DFD to document the payroll processing system at No-Wear Products. and Prepare a document flowchart to document
What can you conclude from the two investments : How about if you increased your investment to $30,000? What can you conclude from the two investments?
Planning to invest your money today : If you are planning to invest your money today in a security that pay you $5,000,000 in 15 years with rate of return on your investment

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd