/*! 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} Q5Q Question:The following are a num... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 6: Q5Q (page 301)

Question:The following are a number of values taken from compound interest tables involving the same number of periods and the same rate of interest. Indicate what each of these four values represents. (a) 6.71008. (c) .46319. (b) 2.15892. (d) 14.48656.

Short Answer

Expert verified

6.71008 shows the present value, 0.46319 shows the future value, 2.15892 shows the present value, and 14.48656 shows the future value of the ordinary annuity.

Step by step solution

01

Step-by-Step solution Step 1 Definition of the ordinary annuity

Ordinary annuityrefers to a series of frequent or regular payments made at the end of each period.Periods can be monthly, quarterly, half-yearly, and yearly.

02

Values representation

The four values mentioned in the question indicates the following:

6.71008 shows the present value of an ordinary annuity at an 8% interest rate for 10 periods (Table 6-4)

0.46319 represents thefuture valueof 1 at 8% for 10 periods.

2.15892 indicates the present value of 1 at 8% for 10 periods

14.48656 represents the future value of the ordinary annuity at 8% for 10 periods

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

You have been hired as a benefit consultant by Jean Honore, the owner of Attic Angels. She wants to establish a retirement plan for herself and her three employees. Jean has provided the following information. The retirement plan is to be based upon annual salary for the last year before retirement and is to provide 50% of Jean鈥檚 last-year annual salary and 40% of the last-year annual salary for each employee. The plan will make annual payments at the beginning of each year for 20 years from the date of retirement. Jean wishes to fund the plan by making 15 annual deposits beginning January 1, 2017. Invested funds will earn 12% compounded annually. Information about plan participants as of January 1, 2017, is as follows.

Jean Honore, owner: Current annual salary of \(48,000; estimated retirement date January 1, 2042.

Colin Davis, flower arranger: Current annual salary of \)36,000; estimated retirement date January 1, 2047.

Anita Baker, sales clerk: Current annual salary of \(18,000; estimated retirement date January 1, 2037.

Gavin Bryars, part-time bookkeeper: Current annual salary of \)15,000; estimated retirement date January 1, 2032.

In the past, Jean has given herself and each employee a year-end salary increase of 4%. Jean plans to continue this policy in the future.

Instructions

(a) Based upon the above information, what will be the annual retirement benefit for each plan participant? (Round to the nearest dollar.) (Hint: Jean will receive raises for 24 years.)

(b) What amount must be on deposit at the end of 15 years to ensure that all benefits will be paid? (Round to the nearest dollar.)

(c) What is the amount of each annual deposit Jean must make to the retirement plan?

Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 12,000 square yards.

Bid A: A surface that costs \(5.75 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface.

Bid B: A surface that costs \)10.50 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 9 cents per square yard.

Instructions Prepare computations showing which bid should be accepted by Wal-Mart. You may assume that the cost of capital is 9%, that the annual maintenance expenditures are incurred at the end of each year, and that prices are not expected to change during the next 10 years.

Johnson Co. accepts a note receivable from a customer in exchange for some damaged inventory. The note requires the customer make semiannual installments of \(50,000 each for 10 years. The first installment begins six months from the date the customer takes delivery of the damaged inventory. Johnson鈥檚 management estimates that the fair value of the damaged inventory is \)679,517.

Accounting

(a) What interest rate is Johnson implicitly charging the customer? Express the rate as an annual rate but assume semiannual compounding.

(b) At what dollar amount do you think Johnson should record the note receivable on the day the customer takes delivery of the damaged inventory?

Analysis

Assume the note receivable for damaged inventory makes up a significant portion of Johnson鈥檚 assets. If interest rates increase, what happens to the fair value of the receivable? Briefly explain why.

Principles

The Financial Accounting Standards Board has issued an accounting standard that allows companies to report assets such as notes receivable at fair value. Discuss how fair value versus historical cost potentially involves a trade-off of one desired quality of accounting information against another.

Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company鈥檚 bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on March 1, 2017, due on March 1, 2032, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%. Instructions As the controller of the company, determine the selling price of the bonds

Question:The Kellys are planning for a retirement home. They estimate they will need $200,000 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at the end of each of the 4 years to fund the home price? (Round to two decimal places.)
See all solutions

Recommended explanations on Business Studies Textbooks

Nature of Business

Read Explanation

Organizational Behavior

Read Explanation

Operational Management

Read Explanation

Family Business

Read Explanation

International Business

Read Explanation

Accounting

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.