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Homework answers / question archive / 1)Amanda Sorenson is planning her retirement

1)Amanda Sorenson is planning her retirement

Finance

1)Amanda Sorenson is planning her retirement. She is presently investing in a 401(k) but needs an additional $500,000 to reach her retirement goal. As luck would have it, Amanda just won a brand new car that is worth $36,000 in a raffle. If Amanda were to sell the car and invest the $36,000 proceeds at a rate of 6.50%, compounded annually, how long will it be before Amanda could retire? (Round off to the nearest 1/10 of a year)

Question 2

 

The future value technique uses discounting to find the future value of each cash flow at the end of a project's life.

 

Question 3

 

The time value of money refers to the issue of:

Question 4

 

Manufic, a detergent manufacturer, has announced this year's net income as $832,500. It expects its net earnings to grow at a rate of 15 percent per year for the next two years, before dropping to 12 percent for each of the following two years. What is the firm's net income after four years? (Round to the nearest dollar.)

Question 5

 

When discount rate:

Question 6

 

Michael Peterson is seeking to accumulate $25,000 in six years to invest in a real estate venture. He can earn 6.35 percent annual interest with monthly compounding in a private investment. How much will he have to invest today to reach his goal? (Round to the nearest dollar.)

Question 7

 

Which of the following is true of the future value of an investment?

Question 8

 

A preferred stock would be an ideal example of:

Question 9

 

Rosalia White will invest $3,000 in an IRA for the next 30 years starting at the end of this year. The investment will earn 13 percent annually. How much will she have at the end of 30 years? (Round to the nearest dollar.)

Question 10

 

You need to have $15,000 in five years to payoff a home equity loan. You can invest in an account that pays 5.75 percent compounded quarterly. How much will you have to invest today to attain your target in five years? (Round to the nearest dollar.)

Question 11

 

The process of converting the initial amount into future value is called discounting.

Question 12

 

Dat Nguyen is depositing $17,500 in an account paying an annual interest rate of 8.25 percent compounded monthly. What is the interest on interest after six years?

Question 13

 

You plan to save $1,400 for the next four years, beginning now, to pay for a vacation. If you can invest it at 6 percent, how much will you have at the end of four years? Round to the nearest dollar.

Question 14

 

Which of the following statements is true of annual percentage rate (APR)?

Question 15

 

Richard McLean wants to invest $3,000 in an account paying 5.25 percent compounded quarterly. What is the interest on interest after four years?

Question 16

 

The annuity transformation method is used to transform:

Question 17

 

Which of the following statements is true of annual percentage rate (APR)?

Question 18

 

Ryan Campbell has invested in a fund that will provide him a cash flow of $11,700 for the next 20 years. If his opportunity cost is 8.5 percent, what is the present value of this cash flow stream? (Round to the nearest dollar.)

Question 19

 

Albend Holmes wants to deposit $4,500 in a bank account that pays 8.25 percent annually. How many years will it take for his investment to grow to $10,000? (Round off to the nearest year.)

Question 20

 

Ann Chang is investing $2,500 today and will do so at the beginning of each of the next six years for a total of seven payments. If her investment can earn 12 percent, how much will she have at the end of seven years? (Round to the nearest dollar.)

Question 21

 

Sid Phillips has funded a retirement investment with $250,000 earning a return of 6.75 percent. What is the value of the payment that he can receive in perpetuity? (Round to the nearest dollar.)

Question 22

 

Locil Agencies is a fast-growing advertising agency. Currently, its sales is at $700,000. The company expects its sales to grow at an annual rate of 35 percent in the next two years, followed by an annual rate of 25 percent in years 3 through 7. Finally, its growth rate would slow down to 10 percent in years 8–10. What will be its sales as of year 10? (Round to the nearest dollar.)

Question 23

 

The process of converting an amount given at the present time into a future value is called:

Question 24

 

Which of the following equations is used to calculate the future value of an investment when interest is compounded m times a year?

Question 25

 

The lease payments by a business of a warehouse rental are an example of an annuity due.

Question 26

 

Animist Designers has generated sales of $625,000 for the current year. If it can grow the sales at a rate of 12 percent every year, how long will it take to triple the sales? (Round off to the nearest year.)

Question 27

 

Which of the following statements is true of amortization?

Question 28

 

 Nutech Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company’s opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

 

Question 29

 

A fertilizer manufacturing company enters into a contract with a county parks and recreation department that calls for the company to sell 10 percent more of its best lawn feed every year for the next five years. If they also agree to maintain the total price as constant over the contract period, this growth in revenue is an example of a growing perpetuity.

 

Question 30

 

Damien McCoy has loaned money to his brother at an interest rate of 5.85 percent. He expects to receive $987, $1,012, $1,062, and $1,162 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.)

 

Question 31

 

Which of the following statements is true with respect to the present value of a future amount?

Question 32

 

Ransport Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)


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