Questions
CO.BU.Quantitative_Business_Prep Module 5 Quiz
Single choice
You want to withdraw $10,000 from an account in 4 years and $8,000 from the same account in 8 years, leaving a balance of $0. If you will earn 8% on your investment, how much must you deposit today to satisfy these future withdrawals?
Options
A.$11,672.45
B.$13,272.38
C.$12,689.39
D.$14,425.52
View Explanation
Verified Answer
Please login to view
Step-by-Step Analysis
To find how much must be deposited today, we should compute the present value of each future withdrawal at an 8% annual return and sum them.
First, evaluate the present value of $10,000 to be withdrawn in 4 years. The discount factor for 4 years at 8% is (1.08)^4 ≈ 1.36049. So PV1 = 10,000 / 1.36049 ≈ 7,350 (approximate......Login to view full explanationLog in for full answers
We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!
Similar Questions
A client offers you the following deal: You will receive $6,000 for the next three years, one payment per year (that is, $6,000 at Year 1, Year 2, and Year 3). In exchange, you will pay $15,000 at Year 4. The current market prices of the following zero-coupon bonds (each with $100 face value) are: Bond A (1-year): price $95.24 Bond B (2-year): price $89.00 Bond C (3-year): price $81.63 Bond D (4-year): price $73.50 Using these bond prices, compute the net value today (Year 0) of the client’s deal to you. Enter your final answer rounded to two decimal places. For example, enter 1.23 if your answer is $1.234, and enter -1.23 if your answer is -$1.234.
Consider a $1,000,000 cash flow to be paid in 5 years. How would you compute the present value? Assume the five-year USD swap rate is 3.5%.
If the value of sustainable investing is $136.5 and the discount rate is 5.6% while the value of non-sustainable investing is $28.7 and the company has a 43.8% probability of being sustainable. What is the expected value today of the company given a 5 year horizon? (Answer to 2 decimal places in $).
If the value of sustainable investing is $152.9 and the discount rate is 10.5% while the value of non-sustainable investing is $33.6 and the company has a 67.7% probability of being sustainable. What is the expected value today of the company given a 18 year horizon? (Answer to 2 decimal places in $).
More Practical Tools for Students Powered by AI Study Helper
Making Your Study Simpler
Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!