/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q9BP You are going to receive $205,00... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 4: Q9BP (page 282)

You are going to receive $205,000 in 18 years. What is the difference in present value between using a discount rate of 12 percent versus 9 percent?

Short Answer

Expert verified

The difference in present value is $16,800.60.

Step by step solution

01

Identification of the required information

Future value (FV) = $205,000

Period (n) = 18 year

02

Present value (PV) at Interest Rate (i) = 12%

PV=FV脳1+i-n=$205,000脳1+12%-18=$26,658.12

03

Present value (PV) at Interest Rate (i) = 9%

PV=FV脳1+i-n=$205,000脳1+9%-18=$43,458.72

04

Difference in present value

Difference in PV=PV at 9% - PV at 12%=$43,458.72-$26,658.12=$16,800.60

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Why does money have a time value?

Question: C. D. Rom has just given an insurance company \(35,000. In return, he will receive an annuity of \)3,700 for 20 years. At what rate of return must the insurance company invest this $35,000 in order to make the annual payments?

Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is

a. 5 percent.

b. 15 percent.

Why is the remaining time to maturity an important factor in evaluating the impact of a change in yield to maturity on bond prices?

How much would you have to invest today to receive b. $20,000 in 12 years at 13 percent?

See all solutions

Recommended explanations on Business Studies Textbooks

Financial Performance

Read Explanation

Strategic Analysis

Read Explanation

Project Planning & Management

Read Explanation

Startups

Read Explanation

Influences On Business

Read Explanation

Managers

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.