# Finance Week 4 Homework Fall 2014 Assignment-Compute the cost of not taking the following cash discounts.

Question1.11/5/14, 1:07 PMaward:2.00 pointsCompute the cost of not taking the following cash discounts. (Use a 360-day year. Do not roundintermediate calculations. Input your final answers as a percent rounded to 2 decimal places.)a.b.c.d.3/19, net 60.2/19, net 45.4/19, net 45.3/16, net 190.Cost of Lost Discount%%%%View Hint #1Worksheet2.Learning Objective: 08-01 Tradecredit from suppliers is normally themost available form of short-termfinancing.Difficulty: Basicaward:1.00 pointA pawnshop will lend $1,500 for 45 days at a cost of $30 interest.What is the effective rate of interest? (Use a 360-day year. Do not round intermediate calculations.Input your answer as a percent rounded to 2 decimal places.)Effective rate of interest%View Hint #1Worksheet3.Difficulty: BasicLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:1.00 pointMary Ott is going to borrow $10,000 for 120 days and pay $140 interest.http://ezto.mheducation.com/hm.tpxPage 1 of 19Assignment Print View11/5/14, 1:07 PMWhat is the effective rate of interest if the loan is discounted? (Use a 360-day year. Do not roundintermediate calculations. Input your answer as a percent rounded to 2 decimal places.)Effective rate on a discounted loan%View Hint #1Worksheet4.Learning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.Difficulty: Basicaward:1.00 pointDr. Ruth is going to borrow $5,500 to help write a book. The loan is for one year and the money can eitherbe borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 9 percent and LIBOR 1.0percent less. Also assume there will be a $70 transaction fee with LIBOR (this amount must be added to theinterest cost with LIBOR).a. What is the effective interest rate on the LIBOR loan? (Use a 360-day year. Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimal places.)Effective interest rateb.%Which loan has the lower effective interest cost?PrimeLIBORView Hint #1Worksheet5.Difficulty: BasicLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:1.00 pointGulliver Travel Agencies thinks interest rates in Europe are low. The firm borrows euros at 13 percent forone year. During this time period the dollar falls 12 percent against the euro. What is the effective interestrate on the loan for one year? (Consider the 12 percent fall in the value of the dollar as well as the interestpayment.) (Compute your answer from a U.S. perspective. Input your answer as a whole percent.)http://ezto.mheducation.com/hm.tpxPage 2 of 19Assignment Print View11/5/14, 1:07 PMEffective interest rate%View Hint #1Worksheet6.Difficulty: BasicLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:1.00 pointTalmud Book Company borrows $17,100 for 70 days at 9 percent interest.What is the dollar cost of the loan? (Use a 360-day year. Do not round intermediate calculations andround your final answer to 2 decimal places.)Cost of loan$View Hint #1Worksheet7.Difficulty: BasicLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:2.00 pointsMcGriff Dog Food Company normally takes 30 days to pay for average daily credit purchases of $9,050. Itsaverage daily sales are $10,190, and it collects accounts in 34 days.a. What is its net credit position?Net credit position$b-1. If the firm extends its average payment period from 30 days to 42 days (and all else remains thesame), what is the firm’s new net credit position? (Negative amount should be indicated by aminus sign.)Net credit position$b-2. Has the firm improved its cash flow?YesNohttp://ezto.mheducation.com/hm.tpxPage 3 of 19Assignment Print View11/5/14, 1:07 PMView Hint #1Worksheet8.Learning Objective: 08-01 Tradecredit from suppliers is normally themost available form of short-termfinancing.Difficulty: Basicaward:1.00 pointCarey Company is borrowing $350,000 for one year at 12.0 percent from Second Intrastate Bank. The bankrequires a 18 percent compensating balance. The principal refers to funds the firm can effectively utilize(Amount borrowed Compensating balance).a. What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent roundedto 2 decimal places.)Effective rate of interest%b. What would the effective rate be if Carey were required to make 12 equal monthly payments to retire theloan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)Effective rate of interest%View Hint #1Worksheet9.Difficulty: IntermediateLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:2.00 pointsYour company plans to borrow $10 million for 12 months, and your banker gives you a stated rate of 14percent interest.Calculate the effective rate of interest for the following types of loans.a. Simple 14 percent interest with a compensating balance of 18 percent. (Use a 360-day year. Input youranswer as a percent rounded to 2 decimal places.)Effective rate of interest%b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2decimal places.)http://ezto.mheducation.com/hm.tpxPage 4 of 19Assignment Print View11/5/14, 1:07 PMEffective rate of interest%c. An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.)Effective rate of interest%d. Discounted interest with a compensating balance of 9 percent. (Use a 360-day year. Input youranswer as a percent rounded to 2 decimal places.)Effective rate of interest%View Hint #1Worksheet10.Learning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.Difficulty: Intermediateaward:1.00 pointIf you borrow $7,300 at $800 interest for one year, what is your effective interest rate for the followingpayment plans? (Input your answers as a percent rounded to 2 decimal places.)Effective Rate ofInteresta. Annual paymentb. Semiannual paymentsc.Quarterly paymentsd. Monthly payments%%%%View Hint #1Worksheet11.Difficulty: IntermediateLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:1.00 pointMr. Hugh Warner is a very cautious businessman. His supplier offers trade credit terms of 2/15, net 90. Mr.Warner never takes the discount offered, but he pays his suppliers in 80 days rather than the 90 daysallowed so he is sure the payments are never late.What is Mr. Warner’s cost of not taking the cash discount? (Use a 360-day year. Do not roundintermediate calculations. Input your answer as a percent rounded to 2 decimal places.)http://ezto.mheducation.com/hm.tpxPage 5 of 19Assignment Print View11/5/14, 1:07 PMCost of not taking a cash discount%View Hint #1Worksheet12.Learning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.Difficulty: Challengeaward:2.00 pointsThe Reynolds Corporation buys from its suppliers on terms of 3/17, net 45. Reynolds has not been utilizingthe discounts offered and has been taking 45 days to pay its bills.Mr. Duke, Vice President of Reynolds Corporation, has suggested that the company begin to take thediscounts offered. Duke proposes that the company borrow from its bank at a stated rate of 16 percent. Thebank requires a 20 percent compensating balance on these loans. Current account balances would not beavailable to meet any of this compensating balance requirement.a. Calculate the cost of not taking a cash discount. (Use a 360-day year. Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimal places.)Cost of not taking a cash discount%b. What is the effective rate of interest on the bank loan? (Use a 360-day year. Do not roundintermediate calculations. Input your answer as a percent rounded to 2 decimal places.)Effective rate of interest%c. Do you agree with Duke’s proposal?YesNoView Hint #1WorksheetDifficulty: Challenge13.Learning Objective: 08-01 Tradecredit from suppliers is normally themost available form of short-termfinancing.Learning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:2.00 pointsNeveready Flashlights Inc. needs $345,000 to take a cash discount of 3/13, net 73. A banker will loan thehttp://ezto.mheducation.com/hm.tpxPage 6 of 19Assignment Print View11/5/14, 1:07 PMmoney for 60 days at an interest cost of $12,300.a.What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimal places.)Effective rate of interest%b. How much would it cost (in percentage terms) if the firm did not take the cash discount but paid the billin 73 days instead of 13 days? (Use a 360-day year. Do not round intermediate calculations. Inputyour answer as a percent rounded to 2 decimal places.)Cost of not taking a cash discount%c. Should the firm borrow the money to take the discount?NoYesd. If the banker requires a 20 percent compensating balance, how much must the firm borrow to end upwith the $345,000?Amount to be borrowed$e-1. What would be the effective interest rate in part d if the interest charge for 60 days were $11,800?(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percentrounded to 2 decimal places.)Effective rate of interest%e-2. Should the firm borrow with the 20 percent compensating balance requirement? (The firm has nofunds to count against the compensating balance requirement.)YesNoView Hint #1WorksheetDifficulty: Challenge14.Learning Objective: 08-01 Tradecredit from suppliers is normally themost available form of short-termfinancing.Learning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:2.00 pointsSummit Record Company is negotiating with two banks for a $157,000 loan. Fidelity Bank requires ahttp://ezto.mheducation.com/hm.tpxPage 7 of 19Assignment Print View11/5/14, 1:07 PMcompensating balance of 24 percent, discounts the loan, and wants to be paid back in four quarterlypayments. Southwest Bank requires a compensating balance of 12 percent, does not discount the loan, butwants to be paid back in 12 monthly installments. The stated rate for both banks is 8 percent.Compensating balances will be subtracted from the $157,000 in determining the available funds in part a.a-1. Calculate the effective interest rate for Fidelity Bank and Southwest Bank. (Do not roundintermediate calculations. Input your answers as a percent rounded to 2 decimal places.)Fidelity BankSouthwest BankEffective Rate ofInterest%%a-2. Which loan should Summit accept?Southwest BankFidelity Bankb. Recompute the effective cost of interest, assuming that Summit ordinarily maintains $37,680 at eachbank in deposits that will serve as compensating balances. (Do not round intermediatecalculations. Input your answers as a percent rounded to 2 decimal places.)Fidelity BankSouthwest BankEffective Rate ofInterest%%c. Does your choice of banks change if the assumption in part b is correct?YesNoView Hint #1Worksheet15.Difficulty: ChallengeLearning Objective: 08-02 Bankloans are usually short term innature and should be paid off fromfunds from the normal operations ofthe firm.award:2.00 pointsCharmin Paper Company sells to the 12 accounts listed next.AccountAhttp://ezto.mheducation.com/hm.tpxReceivableBalanceOutstanding$ 63,100Average Age ofthe AccountOver the Last Year27Page 8 of 19Assignment Print View11/5/14, 1:07 PMBCDEFGHIJKL219,00077,10026,30056,800243,00036,200315,00044,60098,300235,00069,6004314584334256733501635Capital Financial Corporation will lend 90 percent against account balances that have averaged 30 daysor less; 80 percent for account balances between 31 and 40 days; and 70 percent for account balancesbetween 41 and 45 days. Customers that take over 45 days to pay their bills are not considered acceptableaccounts for a loan.The current prime rate is 13.50 percent, and Capital charges 4.50 percent over prime to Charmin as itsannual loan rate.a. Determine the maximum loan for which Charmin Paper Company could qualify.Maximum loan amount$b. Determine how much one months interest expense would be on the loan balance determined in part a.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)Interest expense$View Hint #1Worksheet16.Learning Objective: 08-01 Tradecredit from suppliers is normally themost available form of short-termfinancing.Difficulty: Challengeaward:2.00 pointsThe treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate exposure.She will sell five Treasury futures contracts at $195,000 per contract. It is July and the contracts must beclosed out in December of this year. Long-term interest rates are currently 14.30 percent. If they increase to15.50 percent, assume the value of the contracts will go down by 15 percent. Also if interest rates doincrease by 1.2 percent, assume the firm will have additional interest expense on its business loans andother commitments of $158,000. This expense, of course, will be separate from the futures contracts.a. What will be the profit or loss on the futures contract if interest rates go to 15.50 percent by Decemberwhen the contract is closed out? (Input the amount as a positive value.)(Click to select)on futures contracts$b-1. After considering the hedging, what is the net cost to the firm of the increased interest expense of$158,000?http://ezto.mheducation.com/hm.tpxPage 9 of 19Assignment Print View11/5/14, 1:07 PMNet cost$b-2. What percent of this $158,000 cost did the treasurer effectively hedge away? (Input your answer asa percent rounded to 2 decimal places.)Percentage hedged away%c. Indicate whether there would be a profit or loss on the futures contracts if interest rates went down.LossProfitView Hint #1Worksheet17.Difficulty: ChallengeLearning Objective: 08-05 Hedgingmay be used to offset the risk ofinterest rates rising.award:1.00 pointWhat is the present value of:Use Appendix B as an approximate answer, but calculate your final answer using the formula and financialcalculator methods.a. $8,400 in 12 years at 11 percent? (Do not round intermediate calculations. Round your final answerto 2 decimal places.)Present value$b. $17,200 in 6 years at 9 percent? (Do not round intermediate calculations. Round your final answerto 2 decimal places.)Present value$c. $26,800 in 18 years at 10 percent? (Do not round intermediate calculations. Round your finalanswer to 2 decimal places.)Present value$View Hint #1Worksheet18.Difficulty: BasicLearning Objective: 09-03 Thepresent value is based on thecurrent value of funds to bereceived.award:2.00 pointsYou will receive $5,500 three years from now. The discount rate is 13 percent.http://ezto.mheducation.com/hm.tpxPage 10 of 19Assignment Print View11/5/14, 1:07 PMa. What is the value of your investment two years from now? Multiply $5,500 .885 (one years discountrate at 13 percent). (Round your answer to 2 decimal places.)Value of investment$b. What is the value of your investment one year from now? Multiply your rounded answer to part a by .885(one years discount rate at 13 percent). (Round your answer to 2 decimal places.)Value of investment$c. What is the value of your investment today? Multiply your rounded answer to part b by .885 (one yearsdiscount rate at 13 percent). (Round your answer to 2 decimal places.)Value of investment$d. Confirm that your answer to part c is correct by going to the link provided below (present value of $1) forn = 3 and i = 13%. Multiply this tabular value by $5,500 and compare your answer to part c. There maybe a slight difference due to rounding. Use Appendix B. (Round your answer to 2 decimal places.)Present value$e. Now compute the present value of $5,500 for 3 years at 13 percent using the formula and financialcalculator methods. (Do not round intermediate calculations. Round your answer to 2 decimalplaces.)Present value$View Hint #1Worksheet19.Difficulty: BasicLearning Objective: 09-04 Not onlycan future value and present valuebe computed, but other factors suchas yield (rate of return) can bedetermined as well.award:2.00 pointsIf you invest $16,000 today, how much will you have:Use Appendix A as an approximate answer, but calculate your final answer using the formula and financialcalculator methods.a. In 9 years at 8 percent? (Do not round intermediate calculations. Round your final answer to 2decimal places.)Future value$b. In 20 years at 11 percent? (Do not round intermediate calculations. Round your final answer to 2decimal places.)Future valuehttp://ezto.mheducation.com/hm.tpx$Page 11 of 19Assignment Print View11/5/14, 1:07 PMc. In 18 years at 14 percent? (Do not round intermediate calculations. Round your final answer to 2decimal places.)Future value$d. In 10 years at 14 percent (compounded semiannually)? (Do not round intermediate calculations.Round your final answer to 2 decimal places.)Future value$View Hint #1Worksheet20.Difficulty: BasicLearning Objective: 09-02 Thefuture value is based on the numberof periods over which the funds areto be compounded at a giveninterest rate.award:1.00 pointYour uncle offers you a choice of $120,000 in 10 years or $54,000 today. Use Appendix B as an approximateanswer, but calculate your final answer using the formula and financial calculator methods.a-1. If money is discounted at 9 percent, what is the present value of the $120,000? (Do not roundintermediate calculations. Round your final answer to 2 decimal places.)Present value$a-2. Which offer should you choose?$54,000 today$120,000 after 10 yearsView Hint #1Worksheet21.Difficulty: BasicLearning Objective: 09-03 Thepresent value is based on thecurrent value of funds to bereceived.award:2.00 pointsYour father offers you a choice of $110,000 in 12 years or $47,500 today. Use Appendix B as an approximateanswer, but calculate your final answer using the formula and financial calculator methods.http://ezto.mheducation.com/hm.tpxPage 12 of 19Assignment Print View11/5/14, 1:07 PMa-1. If money is discounted at 10 percent, what is the present value of the $110,000? (Do not roundintermediate calculations. Round your final answer to 2 decimal places.)Present value$a-2. Which offer should you choose?$110,000 in 12 years$47,500 todayb-1. Now assume the offer is $110,000 in 9 years or $47,500 today. What is the present value of the$110,000 at 10 percent for 9 years? (Do not round intermediate calculations. Round your finalanswer to 2 decimal places.)Present value$b-2. Now, which offer should you choose?$47,500 today$110,000 in 9 yearsView Hint #1Worksheet22.Difficulty: BasicLearning Objective: 09-03 Thepresent value is based on thecurrent value of funds to bereceived.award:2.00 pointsHow much would you have to invest today to receive: Use Appendix B or Appendix D for an approximateanswer, but calculate your final answer using the formula and financial calculator methods.a. $12,100 in 5 years at 9 percent? (Do not round intermediate calculations. Round your final answerto 2 decimal places.)Present value$b. $15,500 in 16 years at 10 percent? (Do not round intermediate calculations. Round your finalanswer to 2 decimal places.)Present value$c. $5,500 each year for 12 years at 6 percent? (Do not round intermediate calculations. Round yourfinal answer to 2 decimal places.)http://ezto.mheducation.com/hm.tpxPage 13 of 19Assignment Print View11/5/14, 1:07 PMPresent value$d. $41,000 each year for 20 years at 8 percent? (Do not round intermediate calculations. Round yourfinal answer to 2 decimal places.)Present value$View Hint #1Worksheet23.Learning Objective: 09-03 Thepresent value is based on thecurrent value of funds to bereceived.Difficulty: Basicaward:1.00 pointAt a growth (interest) rate of 13 percent annually, how long will it take for a sum to double? To triple? UseAppendix A for an approximate answer, but calculate your final answer using the formula and financialcalculator methods. (Do not round intermediate calculations. Round your final answers to 2 decimalplaces.)Time needed to doubleTime needed to tripleyearsyearsView Hint #1Worksheet24.Difficulty: BasicLearning Objective: 09-02 Thefuture value is based on the numberof periods over which the funds areto be compounded at a giveninterest rate.award:2.00 pointsJuan Garza invested $104,000 10 years ago at 8 percent, compounded quarterly. How much has heaccumulated? Use Appendix A for an approximate answer but calculate your final answer using the formulaand financial calculator methods. (Do not round intermediate calculations. Round your final answer to2 decimal places.)Future value$View Hint #1Learning Objective: 09-05Compounding or discounting mayhttp://ezto.mheducation.com/hm.tpxPage 14 of 19Assignment Print View11/5/14, 1:07 PMWorksheet25.Difficulty: Intermediatetake place on a less than annualbasis such as semiannually ormonthly.award:1.00 pointDetermine the amount of money in a savings account at the end of 3 years, given an initial deposit of$6,500 and an annual interest rate of 12 percent when interest is compounded: Use Appendix A for anapproximate answer, but calculate your final answer using the formula and financial calculator methods. (Donot round intermediate calculations. Round your final answers to 2 decimal places.)a. Annuallyb. Semiannuallyc. QuarterlyFuture value$$$View Hint #1Worksheet26.Difficulty: IntermediateLearning Objective: 09-05Compounding or discounting maytake place on a less than annualbasis such as semiannually ormonthly.award:1.00 pointAnnuity payments are assumed to come at the end of each payment period (termed an ordinary annuity).However, an exception occurs when the annuity payments come at the beginning of each period (termed anannuity due).What is the future value of a 7-year annuity of $3,700 per period where payments come at the beginning ofeach period? The interest rate is 10 percent. Use Appendix C for an approximate answer, but calculate yourfinal answer using the formula and financial calculator methods. To find the future value of an annuity duewhen using the Appendix tables, add 1 to n and subtract 1 from the tabular value. For example, to find thefuture value of a $100 payment at the beginning of each period for five periods at 10 percent, go toAppendix C for n = 6 and i = 10 percent. Look up the value of 7.716 and subtract 1 from it for an answer of6.716 or $671.60 ($100 6.716). (Do not round intermediate calculations. Round your final answersto 2 decimal places.)Future value$View Hint #1Worksheethttp://ezto.mheducation.com/hm.tpxDifficulty: IntermediateLearning Objective: 09-04 Not onlycan future value and present valuebe computed, but other factors suchas yield (rate of return) can bedetermined as well.Page 15 of 19Assignment Print View27.11/5/14, 1:07 PMaward:2.00 pointsYour grandfather has offered you a choice of one of the three following alternatives: $12,000 now; $6,000 ayear for six years; or $76,000 at the end of six years. Use Appendix B and Appendix D for an approximateanswer, but calculate your final answer using the formula and financial calculator methods.a-1. Assuming you could earn 10 percent annually, compute the present value of each alternative: (Do notround intermediate calculations. Round your final answers to 2 decimal places.)Present Value$12,000$$6,000$76,000$$a-2. Which alternative should you choose?$76,000 received at end of six years$6,000 received each year for six years$12,000 received nowb-1. If you could earn 11 percent annually, compute the present value of each alternative: (Do not roundintermediate calculations. Round your final answers to 2 decimal places.)$12,000$6,000$76,000Present Value$$$b-2. Which alternative should you choose?$76,000 received at end of six years$6,000 received each year for six years$12,000 received nowView Hint #1Worksheet28.Difficulty: ChallengeLearning Objective: 09-03 Thepresent value is based on thecurrent value of funds to bereceived.award:2.00 pointsYou need $25,356 at the end of 9 years, and your only investment outlet is an 9 percent long-termcertificate of deposit (compounded annually). With the certificate of deposit, you make an initial investmentat the beginning of the first year. Use Appendix B and Appendix C for an approximate answer, but calculateyour final answer using the formula and financial calculator methods.http://ezto.mheducation.com/hm.tpxPage 16 of 19Assignment Print View11/5/14, 1:07 PMa. What single payment could be made at the beginning of the first year to achieve this objective? (Do notround intermediate calculations. Round your final answer to 2 decimal places.)Single payment made$b. What amount could you pay at the end of each year annually for 9 years to achieve this same objective?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)Amount to be paid$View Hint #1Worksheet29.Difficulty: ChallengeLearning Objective: 09-04 Not onlycan future value and present valuebe computed, but other factors suchas yield (rate of return) can bedetermined as well.award:1.00 pointFranklin Templeton has just invested $10,760 for his son (age one). This money will be used for his sonseducation 17 years from now. He calculates that he will need $54,343 by the time the boy goes to school.What rate of return will Mr. Templeton need in order to achieve this goal? Use Appendix B for an approximateanswer, but calculate your final answer using the formula and financial calculator methods. (Do not roundintermediate calculations. Round your final answer to 2 decimal places.)Rate of return%View Hint #1Worksheet30.Difficulty: ChallengeLearning Objective: 09-04 Not onlycan future value and present valuebe computed, but other factors suchas yield (rate of return) can bedetermined as well.award:1.00 pointYou wish to retire in 12 years, at which time you want to have accumulated enough money to receive anannual annuity of $27,000 for 17 years after retirement. During the period before retirement you can earn 8percent annually, while after retirement you can earn 10 percent on your money.What annual contributions to the retirement fund will allow you to receive the $27,000 annuity? Use AppendixC and Appendix D for an approximate answer, but calculate your final answer using the formula and financialhttp://ezto.mheducation.com/hm.tpxPage 17 of 19Assignment Print View11/5/14, 1:07 PMcalculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimalplaces.)Annual contribution$View Hint #1Worksheet31.Difficulty: ChallengeLearning Objective: 09-04 Not onlycan future value and present valuebe computed, but other factors suchas yield (rate of return) can bedetermined as well.award:1.00 pointDel Monty will receive the following payments at the end of the next three years: $13,000, $16,000, and$18,000. Then, from the end of the 4th through the end of the 10th year, he will receive an annuity of$19,000 per year.At a discount rate of 10 percent, what is the present value of all three future benefits? Use Appendix B andAppendix D for an approximate answer, but calculate your final answer using the formula and financialcalculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimalplaces.)Present value of all future benefits$View Hint #1Worksheet32.Difficulty: ChallengeLearning Objective: 09-03 Thepresent value is based on thecurrent value of funds to bereceived.award:2.00 pointsYour uncle borrows $55,000 from the bank at 9 percent interest over the seven-year life of the loan. UseAppendix D for an approximate answer but calculate your final answer using the formula and financialcalculator methods.a. What equal annual payments must be made to discharge the loan, plus pay the bank its required rate ofinterest? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)Annual payments$b. How much of his first payment will be applied to interest? To principal? (Do not round intermediatecalculations. Round your final answers to 2 decimal places.)http://ezto.mheducation.com/hm.tpxPage 18 of 19Assignment Print View11/5/14, 1:07 PMFirst Payment$$InterestPrincipalc. How much of his second payment will be applied to each? (Do not round intermediate calculations.Round your final answers to 2 decimal places.)InterestPrincipalSecond Payment$$View Hint #1Worksheet33.Difficulty: ChallengeLearning Objective: 09-04 Not onlycan future value and present valuebe computed, but other factors suchas yield (rate of return) can bedetermined as well.award:2.00 pointsYour parents have accumulated a $120,000 nest egg. They have been planning to use this money to paycollege costs to be incurred by you and your sister, Courtney. However, Courtney has decided to forgocollege and start a nail salon. Your parents are giving Courtney $27,000 to help her get started, and theyhave decided to take year-end vacations costing $12,000 per year for the next four years. Use 9 percent asthe appropriate interest rate throughout this problem. Use Appendix A and Appendix D for an approximateanswer, but calculate your final answer using the formula and financial calculator methods.a. How much money will your parents have at the end of four years to help you with graduate school,which you will start then? (Round your final answer to 2 decimal places.)Funds available for graduate school$b. You plan to work on a masters and perhaps a PhD. If graduate school costs $27,180 per year,approximately how long will you be able to stay in school based on these funds? (Round your finalanswer to 2 decimal places.)Number of yearsrev: 10_11_2014_QC_56342