1. On 12-31-15 Acme entered into an agreement that required Acme to pay someone $100,000 on 12-31-30. Assume the appropriate market rate of interest for Acme was 6%.
- As of 12-31-15, what was the present value of Acme's obligation?
- As of 12-31-25, what was the present value of Acme's obligation?
- As of 12-31-28, what was the present value of Acme's obligation?
2. On 12-31-13 Austin entered into an agreement that required Austin to pay a supplier $500 every year on 12-31 until 2025. The agreement required Austin to make the first annual payment on 12-31-14. Assume the market rate of interest for Austin is 3%. As of 12-31-13 what was the present value of Austin's obligation?
3. On 12-31-14 J entered into an agreement allowing J to collect the following:
- Starting 12-31-14, $500 every 12-31 until 2024.
- On 12-31-25, a one-time collection of $5,000.
- Nothing in 2026 or 2027.
- Starting 12-31-28, $400 every 12-31 until 12-31-44.
How much total cash will J eventually collect?
Assume a market interest rate of 9%. As of 12-31-14, what was the present value of J's receivable?
4. On 12-31-16 O entered into an agreement that allowed O to collect the following:
- Starting 12-31-19, $5,000 every 12-31 until 2027
- Starting 12-31-28, $2,000 every 12-31 until 12-31-36
Assume a market interest rate of 4.25%. As of 12-31-16, what was the present value of O's receivable?
5. On 12-31-13 O accepted a 3%, 6-year, $500,000 note in exchange for services O rendered to P. O will collect the note principle in full upon maturity and O will collect interest every December 31 starting December 31, 2014. The market rate of interest at the time services were rendered was 2%. What was the present value of O's receivable as of 12-31-13?