Hi could you please answer these? e. Assume that the average price of a new home

Question

Hi could you please answer these?

e. Assume that the average price of a new home is $120,500. If new homes are increasing at a rate of 10% per year, how much will a new home cost in eight years? (Round your answer to 2 decimal places. Future value f. An investment will pay you $9,000 in 9 years, and it will also pay you $280 at the end of each of the next 9 years (years 1 thru 9). If the annual interest rate is 5%, how rmuch would you be willing to pay today for this type of investment? (Round your intermediate calculations and final answer to the nearest whole dollar.) Present value g. A college student is reported in the newspaper as having won $9,500,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $9.5 million now. Instead she will receive $475,000 at the end of the year for each of the next 20 years. If the annual interest rate is 6%, what is the present value (today's amount) that she won? (ignore taxes). (Round your answer to nearest whole dollar) Present value

Explanation / Answer

e)

Cost of new homes in 8 years = 120500*(1.10)^8 = 120500*2.1435 = 258291.75

f)

Present value = 9000*Present value interest factor(5%,9) + 280*[Present value annuity factor(5%,18) - Present value annuity factor(5%,9)

= 9000*0.6446 + 280*(11.6895 - 7.1078)

= 5801.40 + 280*4.5817

= 5801.40 + 1282.876 = 7084

g)

Present value of lottery = 475000*Present value annuity factor(6%,20)

= 475000*12.47 = 5923250

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