Lloyd is a divorce attorney who practices law in Florida He

Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce Lawyers Association (ADLA), a professional organization for divorce attorneys. The membership dues for the ADLA are $750 per year and must be paid at the beginning of each year. For instance, membership dues for the first year are paid today, and dues for the second year are payable one year from today. However, the ADLA also has an option for members to buy a lifetime membership today for $7,000 and never have to pay annual membership dues. Obviously, the lifetime membership isn\'t a good deal if you only remain a member for a couple of years, but if you remain a member for 40 years, it\'s a great deal. Suppose that the appropriate annual interest rate is 8.9%, what is the minimum number of years that Lloyd must remain a member of the ADLA so that the lifetime membership is cheaper (on a present value basis) than paying $750 in annual membership dues? (Note: Round your answer up to the nearest year.) O 18 years O 17 years O 13 years 15 years In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 4% annual interest rate, what is its value as of 2012 (386 years later)? O $76,647,701.66 O $119,029,371.99 $103,699,831.66 O $90,173,766.66

Solution

For every year annual membership payment present value at 8.9% is calculated. When the present values are accumulated, from payment 17 onwards they exceed $7,000, that means if lyord remains member for atleast 17 years she can benefit from taking life time membership.

Hence, the answer is 17 years.

Question 2:

*Hope the above explanation helps, please comment if further explanation is required. Your rating is appreciated*

Year	Payment	Discount factor	Present value	Cummulative value	Life time payment benefit
1.00			750.00	750.00	-6,250.00
2	750.00	0.918274	688.71	1,438.71	-5,561.29
3	750.00	0.843226	632.42	2,071.13	-4,928.87
4	750.00	0.774313	580.73	2,651.86	-4,348.14
5	750.00	0.711031	533.27	3,185.13	-3,814.87
6	750.00	0.652921	489.69	3,674.82	-3,325.18
7	750.00	0.59956	449.67	4,124.49	-2,875.51
8	750.00	0.55056	412.92	4,537.41	-2,462.59
9	750.00	0.505565	379.17	4,916.59	-2,083.41
10	750.00	0.464247	348.19	5,264.77	-1,735.23
11	750.00	0.426306	319.73	5,584.50	-1,415.50
12	750.00	0.391465	293.60	5,878.10	-1,121.90
13	750.00	0.359472	269.60	6,147.71	-852.29
14	750.00	0.330094	247.57	6,395.28	-604.72
15	750.00	0.303117	227.34	6,622.61	-377.39
16	750.00	0.278344	208.76	6,831.37	-168.63
17	750.00	0.255596	191.70	7,023.07	23.07
18	750.00	0.234707	176.03	7,199.10	199.10
19	750.00	0.215525	161.64	7,360.74	360.74
20	750.00	0.197911	148.43	7,509.18	509.18
21	750.00	0.181737	136.30	7,645.48	645.48
22	750.00	0.166884	125.16	7,770.64	770.64
23	750.00	0.153245	114.93	7,885.57	885.57
24	750.00	0.140721	105.54	7,991.12	991.12
25	750.00	0.12922	96.92	8,088.03	1,088.03
26	750.00	0.11866	88.99	8,177.03	1,177.03
27	750.00	0.108962	81.72	8,258.75	1,258.75
28	750.00	0.100057	75.04	8,333.79	1,333.79
29	750.00	0.09188	68.91	8,402.70	1,402.70
30	750.00	0.084371	63.28	8,465.98	1,465.98
31	750.00	0.077475	58.11	8,524.08	1,524.08
32	750.00	0.071144	53.36	8,577.44	1,577.44
33	750.00	0.065329	49.00	8,626.44	1,626.44
34	750.00	0.05999	44.99	8,671.43	1,671.43
35	750.00	0.055087	41.32	8,712.75	1,712.75
36	750.00	0.050585	37.94	8,750.69	1,750.69
37	750.00	0.046451	34.84	8,785.52	1,785.52
38	750.00	0.042655	31.99	8,817.52	1,817.52
39	750.00	0.039169	29.38	8,846.89	1,846.89
40	750.00	0.035968	26.98	8,873.87	1,873.87
41	750.00	0.033028	24.77	8,898.64	1,898.64
42	750.00	0.030329	22.75	8,921.39	1,921.39
43	750.00	0.02785	20.89	8,942.27	1,942.27
44	750.00	0.025574	19.18	8,961.45	1,961.45
45	750.00	0.023484	17.61	8,979.07	1,979.07
46	750.00	0.021565	16.17	8,995.24	1,995.24