Name 2 (40 points) Lets do some short quick ones... al i win the lottery. They w

Question

Name 2 (40 points) Lets do some short quick ones... al i win the lottery. They will pay me 10 million dollars over 20 years at s 500,000 per year. what is the present value if I : 8% b) I have a student loan of $ 45,000. I will defer payments for 4 years at 6%, what would my payments be if I then set up the payback for 15 years at 6%. c) I have decided I would like to set up a trust fund to provide $ 100,000 per year . forever.. for my favorite charity. I assume '-8%, what is the capitalized cost?

Explanation / Answer

(a)

Present value ($) = 500,000 x P/A(8%, 20) = 500,000 x 9.8181** = 4,909,050

(b)

Value of loan after 4 years ($) = 45,000 x F/P(6%, 4) = 45,000 x 1.2625** = 56,812.5

Annual payments ($) = 56,812.5 / P/A(6%, 15) = 56,812.5 / 9.7122** = 5,849.60

(c)

Capitalized cost ($) = Annual perpetuity / Interest rate = 100,000 / 0.08 = 1,250,000

**From P/A and F/P Factor tables

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.