# Marcos receives an annuity payment of \$2,500, payable every two years, for the next ten years. The next payment is due two years from today. What is the present value of this annuity at a discount rate of 5 percent?

\$9,416.75

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator

Cash flow in year 1 = 0

Cash flow in year 2 = \$2500

Cash flow in year 3 = 0

Cash flow in year 4 = \$2500

Cash flow in year 5 = 0

Cash flow in year 6 = \$2500

Cash flow in year 7 = 0

Cash flow in year 8 = \$2500

Cash flow in year 9 = 0

Cash flow in year 10 = \$2500

Present value = \$9416.75

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

The present value of the annuity payments that Marcos receives is approximately \$11,614.58, using the given 5% discount rate and considering the biennial payment structure.

### Explanation:

To calculate the present value of an annuity where payments are made every two years, we can use the present value of an ordinary annuity formula. Since payments are made every two years, we adjust our calculations to reflect this. Given the discount rate of 5% and the next payment due to be in two years, we will use this rate for our calculations.

Here's how to find the present value of the annuity that Marcos receives. We would use the following formula for the present value (PV) of an ordinary annuity:

PV = Pmt * [(1 - (1 + r)^-n) / r]

Where Pmt is the annuity payment, r is the discount rate per compounding period, and n is the total number of compounding periods.

Marcos's annuity:

• Payment (Pmt) = \$2,500
• Discount rate (r) = 0.05/2 = 0.025 (since payment is every two years)
• Number of payments (n) = 10/2 = 5

Using these details, we calculate:

PV = \$2,500 * [(1 - (1 + 0.025)^-5) / 0.025]

PV = \$2,500 * 4.64583... (factor obtained from the formula)

PV ≈ \$11,614.58

So the present value of the annuity that Marcos receives is approximately \$11,614.58.

brainly.com/question/17112302

#SPJ3

## Related Questions

The average annual return over the period​ 1886-2006 for stocks that comprise the​ S&P 500 is 8​%, and the standard deviation of returns is 20​%. Based on these numbers what is a​ 95% confidence interval for 2007​ returns?

The confidence interval for 2007​ returns are 32%, 48%

Explanation:

As per 9% rule

Range = mean +/- 2*Standard deviation

Range = 8 +/- 2*20

Range = 8-40 to 8+40

Range = -32 to 48

"________ is an area that allows member states to freely move components of production such as capital and labor across borders"

Explanation:

Common market is also a type of economic integration. The economic integration ranges from Preferential trade agreement, free trade agreement, custom unions, common market and economic union.

The countries cooperate with each other by initiating these types of economic integration.

Common market is a category of economic integration where there can be a free flow of factors of production such as capital and labor between the nations. There is a free movement of capital and labor among trading partners. Common market is a area where group of countries work together to encourage trade by removing tariffs for their member countries.

A Nike women's-only store in California offers women's running, training, and sportswear products and also contains an in-store fitness studio for group and personal fitness training sessions. The store consistently earns profits in excess of \$437,000 per year and is located on prime real estate in the center of town. The store owner pays \$18,000 per month in rent for the building. A real estate agent approached the owner and informed her that she could add \$7,700 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio. While the prospect of acquiring this rental income was enticing, the owner believed the use of that space as a fitness studio was an important contributor to her store's profits. What is the opportunity cost of continuing to operate the fitness studio within the store?

Opportunity Cost:

Opportunity cost can be denied as the benefit a person has received but giving up taking another course of action. In other words, it can be defined as the next best alternative.

Given that the Nike women's store earns a profit in excess of \$437,000. The owner of the store pays \$18,000 per month as rent. A real estate agent approached the owner and informed her that she could add \$7,700 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio.

From the given question the opportunity cost of continuing to operate the fitness studio within the store is \$7,700.

Wholemark is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on which the card is printed is \$0.40 per card, and the cost of printing is \$0.10 per card. The company receives \$3.75 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Their customers are from the four areas: Los Angeles, Santa Monica, Hollywood, and Pasadena. Based on past data, the number of customers from each of the four regions is normally distributed with mean 2,300 and standard deviation 200. (Assume these four are independent.)What is the optimal production quantity for the card?

≈ 9644 quantity of card

Explanation:

given data:

n = 4 regions/areas

mean demand = 2300

standard deviation = 200

cost of card (c) = \$0.5

selling price (p) = \$3.75

salvage value of card ( v ) = \$ 0

The optimal production quantity for the card can be calculated using this formula below

= u + z (0.8667  ) * б

= 9200  +  1.110926 * 400

≈ 9644 quantity of card

First we have to find u

u = n * mean demand

= 4 * 2300 = 9200

next we find the value of Z

Z = ( )

= ( 3.75 - 0.5 ) / 3.75   = 0.8667

Z( 0.8667 ) = 1.110926 ( using  excel formula : NORMSINV (0.8667 )

next we find б

б = 200 = 400

You are the CFO of a publicly-traded company in a very competitive industry. You are preparing the annual report and SEC filings and you are carefully considering how much information to provide. You fear that your competitors could gain some advantage if you present too much detail but you know that investors want more detail so they can evaluate the business (and management) performance. How do you handle these conflicting elements?

Investors structure is a significant part of an organization. In this manner, it is important to provide the significant data so they can take inform decision. The yearly report give the imperative data the utilization of which they can shape solid justification for taking choices. In any case, most of the time, dominant part of the investors/speculators barely spend their valuable time on examining every single figure gave in the financials. They experience the nuts and bolts and basics as it were. In this manner just material realities must be unveiled in the reports as contenders might be peering toward on the subtleties. That is, it is significant not to reveal the "exchange insider facts" of the organization in its reports. A lot of data prompts data over-burden with which contenders may exploit. It ought to likewise be dealt with that what must be incorporated is incorporated as a general rule.

As a CFO of a publicly-traded company, one should focus on providing meaningful and relevant information to shareholders without revealing strategic specifics that would benefit competitors. This balance can be achieved through effective disclosure management.

### Explanation:

As the CFO of a publicly-traded company, you must balance between sharing too much information which can aid your competitors and offering comprehensive details to investors for performance evaluation. The key to resolving this conflict lies in disclosure management. More specifically, you should focus on providing meaningful and relevant information to support investors' decision-making without revealing strategic specifics that would help competitors. For example, quantitative information related to sales, cost, profit, and balance sheet items could be released, along with commentary on operational and financial performance. However, strategic plans, detailed product plans and similar items that could give an advantage to competitors should not be disclosed.

brainly.com/question/31540671

#SPJ3

A call option on MassComputer Corp. is trading with a strike price of \$100 and an expiration date on November 18th at 4 pm in the afternoon. The premium paid on the call is \$7.55. What is the net profit or loss from buying the call just prior to 4 pm on November 18 if at this time the stock price per share of MassComputer is:

The net profit or loss from buying the call should be \$3.17 and -\$7.55.

### Calculation of stock price per share:

here, a Stock price higher than the strike price option will be exercised.

Net profit = Stock price - Strike price - Option premium

= \$110.72 - \$100 - \$7.55

Net profit = \$3.17

Stock price is lower than the strike price option will fail.

Net profit = Stock price - Strike price - Option premium

= 0 - \$7.55

Net profit(loss) = -\$7.55