A one-time lump sum payment is paid at the inception of the annuity-type policies and most of the life insurance-type policies. If you do not file any claims on the annuity-type policy‚ you may be able to cash in the policy or upon death be eligible for a return of most of the premium. In the case of a life insurance policy with a long term care rider‚ if you do not
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PV= C/ (1+r)n Valuing Streams of CF NPV= ∑Cn/ (1+r)n Perpetuity Stream of equal CF that last forever PV= C/r Annuity A stream of CF that occur at regular intervals for N periods Growing Perpetuities Stream of CF that occur at regular intervals and grow at a constant rate forever (growing dividend) NPV= C/ r – g g= growth rate Growing Annuities PV= C x (1/(r-g)) (1-((1+g)/(1+r))N What if g>r? * not possible for g to be greater than GDP growth rate –
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CHAPTER 21 Accounting for Leases SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 21-1 The lease does not meet the transfer of ownership test‚ the bargain purchase test‚ or the economic life test [(5 years ÷ 8 years) < 75%]. However‚ it does pass the recovery of investment test. The present value of the minimum lease payments ($31‚000 X 4.16986 = $129‚266) is greater than 90% of the FV of the asset (90% X $138‚000 = $124‚200). Therefore‚ Callaway should classify the lease as a capital lease.
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money to determine loan payment schedules and the number that students most fear‚ the ending balance‚ the future value of the loan. Credit card companies would use the formula for present value of an annuity to determine the payment schedule‚ and they would use the formula for future value of an annuity to determine how much money the student will end up paying the credit card company at the end of student loan. Insurance companies also use time value of money. A structured settlement is one example
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Running head: SHORT TITLE OF PAPER The Value of Money Reggnia Gilchrist Argosy University LASA 1 Time Value of Money A. The future value of a dollar amount put into a savings account reflects what we expect the value of the dollar amount to be in a fixed amount of time‚ or how we expect the money to grow. Growth or in this case savings account‚ the interest rate paid‚ is the amount that we have deposited. Mary has been depositing $500 in her savings account for the last 19yrs‚ which
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Some sample solutions of annuity problems Typical MAT 112 problems: What is the value of an ordinary annuity at the end of 10 years if $300 is deposited each quarter into an account earning 7 % compounded quarterly? Also‚ of this total value‚ how much did you contribute and how much is from the interest? For 40 deposits of $300 each with [pic]‚ we find the accumulated value as [pic] The total interest earned is the difference between the amount in the account and what you actually
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UNIVERSITY OF CAPE TOWN NOVEMBER 2009 EXAMINATIONS INTRODUCTION TO ACTUARIAL SCIENCE (BUS1003H) Time allowed: 2 hours Total marks: 70 INSTRUCTIONS • Answer all questions • You must show your working in full in all questions • Approved calculators may be used‚ but all memories and user-supplied programmes must be cleared before you begin the examination. • Some tables are provided. • For each of the
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Week 2 Sources of Finance 1) Introduction It was explained in week 1 that this week’s lectures will focus primarily on institutions that provide finance. Finance has been defined by Chadwick and Kirkby (1995‚ p 38) in their book Financial Management (first edition‚ publisher Routledge) as a “system of costs and risks”. As we will see throughout the course‚ the notion of risk from an investor’s point of view is related to whether there is the accrual of the financial returns that are anticipated
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tax deduction for Social Security (FICA) withholding? A: The Democratic Party. Q: Which Political Party started taxing Social Security annuities? A: The Democratic Party‚ with Al Gore casting the ‘tie-breaking’ deciding vote as President of the Senate‚ while he was Vice President of the US AND MY FAVORITE: Q: Which Political Party decided to start giving annuity payments to immigrants? A: That’s right! Jimmy Carter and the Democratic Party. Immigrants moved into this country‚ and at age 65‚ began
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present value of her inheritance? (Round to the nearest dollar.) Present value of an annuity: Transit Insurance Company has made an investment in another company that will guarantee it a cash flow of $37‚250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments‚ what is the present value of this investment? (Round to the nearest dollar.) Future value of an annuity: Carlos Menendez is planning to invest $3‚500 every year for the next six years in an
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