An insurance company has offered your friend the choice of $45,000 per year for 15 years, with the first payment being made toda
y, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity?
1 answer:
Answer:
$427,011.92
Explanation:
We use the present value formula i.e to be shown in the attached spreadsheet
Given that,
Future value = $0
Rate of interest = 7.5%
NPER = 15 years
PMT = $45,000
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
And, in type we write the 1 instead of 0
So, after solving this, the present value is $427,011.92
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Answer:
A. $73,000
Explanation:
When a company is protected by a hedge it pays the forward exchange rate of the day it entered into the forward contract when payment date has come.
The Question is incomplete. Below are the missing parts and attached picture with spot rate and forward exchange rate.
Select one:
A. $73,000
B. $72,700
C. $73,200
D. $75,000
Answer:
a) 749
b) 4.073
Explanation:
Given:
Mean = demand = 80 pounds
Standard deviation of demand = 10 pounds
Lead time = 8 days
Standard deviation of lead time = 1 day
a) What ROP would provide a stock out risk of 10 percent during lead time.
To find this re-order point (ROP) quantity, take the formula:
Here, service level = 100%-10% = 90%,
Thus z at 90% = ±1.28
= 640 + 1.28* 84.85
= 748.61
≈ 749 units
b) What is the expected number of units (pounds) short per cycle.
Find the number of units shorts per cycle. Take the formula:
[
Where E(z) = standardized number of shorts = 0.048
= standard deviation of lead time demand = 84.85
Therefore,
E(n) = 0.048 * 84.85
= 4.073