Below is a few questions I need explantions for, answers are helpful but not rel

Question

Below is a few questions I need explantions for, answers are helpful but not relevant, I know there are formulas for these but I am away from my textbook. Thanks inadvance.

A. Mr. Jones just won a lottery prize that will pay him $5,000 a year for thirty years. If Mr. Jones can earn 5 percent on his money, what are his winnings worth to him today?

B. A preferred stock pays an annual dividend of $5. If you want to earn 11 percent on this investment, what is the maximum amount you should pay to purchase one share of this stock today?

C. Your parents would like to establish a trust fund that would pay annual payments to you of $50,000 a year forever. The fund will earn a guaranteed return of 8 percent. How much do your parents need to deposit into this trust fund today to achieve their goal?

Explanation / Answer

A. Mr. Jones just won a lottery prize that will pay him $5,000 a year for thirty years. If Mr. Jones can earn 5 percent on his money, what are his winnings worth to him today? Ans) Monthly received 5000 Rate of return he can earn 5% P.A Present value of annuity factor 15.372451 Value of the Lottety price = Monthly Receivable * Present value of annuity Factory Value of the Lottety price = $        76,862 B. A preferred stock pays an annual dividend of $5. If you want to earn 11 percent on this investment, what is the maximum amount you should pay to purchase one share of this stock today? Ans) Annual Divided $5 Rate of return you want 11% Interest Amount = PNR/100 I *100/NR = P 5*100/11*1   = P $                                                  45.45 = P The amount he has to investment in the preferrence stock $45.45 C. Your parents would like to establish a trust fund that would pay annual payments to you of $50,000 a year forever. The fund will earn a guaranteed return of 8 percent. How much do your parents need to deposit into this trust fund today to achieve their goal? Ans) Return on Fund = 8% Annual Payment you want = $50,000 Fund Value = i*100/NR = $50000*100/8*1 Fund Value = $        625,000 Parents need to deposit into to trust fund today = $        625,000

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