What happen to the present value of some fixed dollar amount

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Reference no: EM132401201 , Length: word count : 300

Assignment

Answer the following questions:

What happens to the future value of some fixed dollar amount invested today as the interest rate decreases? Why?

What happens to the present value of some fixed dollar amount to be received in the future as the interest rate increases? Why?

What happens to the present value of some fixed dollar amount to be received in the future as the time to receive the money decreases? Why?

Which will have a higher present value, assuming the same discount rate, same # of payments, and same amount of payments, an ordinary annuity or an annuity due? Why?

The Lancer Leasing Company has agreed to lease a hydraulic trencher to the Chavez Excavation Company (or 520.000 a year over the next eight years. Lease payments are to he made at the beginning of each year. Assuming that Lancer invests these payments at an annual rate of 9 percent, how much will it have accumulated by the end of the eighth year?

A leading broker has advertised money multiplier certificates that will triple your money in nine years; that is, if you buy one for 3333.33 today, it will pay you $1.000 at the end of nine years. What rate of rerun will you earn on these money multiplier certificates?

A firm purchases IOU acres of land for 5200.000 and agrees to remit 20 equal annual end ot year installments of $41,067 each. What is the true annual interest rate on this loan?

Ted Gardiner has just turned 30 years old. He has currently accumulated $35,000 toward his planned retirement at age 60. He wants to accumulate enough money over the next 30 years to provide for a 20-year retirement annuity of 5100.000 at the beginning of each year, starting with his 60th birthday. He plans to save $5,000 at the end of each of the next 10 years. What equal amount must he save at the end of years I I through 30 to meet this objective? The interest rate for the first 10 years will be 5 percent. After that time, the interest rate is expected to be 7 percent.

Reference no: EM132401201

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