Question

YOUR AUNT HAD AGREED TO GIVE YOU A GIFT. She is going to give you a choice in how you may collect…

  1. YOUR AUNT HAD AGREED TO GIVE YOU A GIFT. She is going
    to give you a choice in how you may collect your gift. You may take
    $10,000 payable at the end of each year for 10 years ( for a gift
    sum of 100,000). Alternatively you may select an option provides
    you with your gift right in cash. If you accept a 6% rate of return
    as an appropriate rate of return, how much will you receive today
    if you take the cash rather than the annual payments?
  1. Congratulations, you have just graduated and accepted
    an offer from well known corporation – make a lot a mony inc. You
    also have a new daughter. You would like to save some money from
    your new big salary in order to have 50,000 for your daughter to
    use for college in 18 yrs. If you can earn 9% on your money, how
    much do you have to put away ?
  1. You are the new manager of a new department at a
    major bank. As part of your job, you must estimate the rate of
    inflation to be included in your banks estimates of rates to charge
    on loans. If your current estimate of inflation is 3.1% per month,
    what is your estimate of the compound annual rate of
    inflation.

Solutions

Expert Solution


Submit Your Answer