Q1 Present Value of an Annuity On January 1 2016 you win 144

Q1

Present Value of an Annuity

On January 1, 2016, you win $1,440,000 in the state lottery. The $1,440,000 prize will be paid in equal installments of $120,000 over 12 years. The payments will be made on December 31 of each year, beginning on December 31, 2016. If the current interest rate is 7%, determine the present value of your winnings. Use Table below. Round to the nearest whole dollar.

Q2:

resent Value of Bonds Payable; Discount

Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder Co. issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market (effective) interest rate of 9%.

Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10. Round to the nearest dollar.

Q3:

Present Value of Bonds Payable; Premium

Mason Co. issued $680,000 of five-year, 11% bonds with interest payable semiannually, at a market (effective) interest rate of 10%.

Determine the present value of the bonds payable, using the present value tables in Exhibit 4 and Exhibit 5. Round to the nearest dollar.
$

65 83 5 8 41 76 44455 01233 44556 66777 78888 88889 99999 99999 9 9 9 7778 0 01233 45666 777“8 89999 00000 01234 45567 77889 99000 01111 11222 22222 3 3 3 01234 45667 78899 00011 12222 33333 34444 5 5 5 2 01234 45667 88990 87 70 89 79 72 58 86 55 02 19 99 29 94 0123 55677 89900 11223 3344 55566 66777 8 9. 9. 5

Solution

Q1) Present value of winning = 120000*7.94269 = $953123

Q2) Present value of bonds = (25000000*3.5%*7.91272+25000000*0.643930) = 23021880

Q3) Present value of bonds = (680000*5.5%*7.72173+680000*0.61391) = 706252