TRADITIONAL HOMEWORK ITEMS – FALL 2023 – ACT 3391General Instructions for the Traditional Homework – refer to the instructions for traditional item no. 1.
17. (2 points) On 12-31-22, Acme entered into an agreement that required Acme to pay someone $25,000 on 12-31-28. Assume the
appropriate market rate of interest for Acme was 5%.
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As of 12-31-22, what was the present value of Acme’s obligation?
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As of 12-31-26, what was the present value of Acme’s obligation?
18. (2 point) On 12-31-16, Austin entered into an agreement that required Austin to pay a supplier $500 every year on 12-31 until
2027. Assume the market rate of interest for Austin is 3%.
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Assume the agreement required Austin to make the first annual payment on 12-31-16. As of 12-31-16 what was the present
value of Austin’s obligation?
Assume the agreement required Austin to make the first annual payment on 12-31-17. As of 12-31-16 what was the present
value of Austin’s obligation?
19. (2 points) On 12-31-19, Austin entered into an agreement that required Austin to pay a supplier $2,500 every year on 12-31 until
2030. The agreement required Austin to make the first annual payment on 12-31-24. Assume the market rate of interest for
Austin is 2%. As of 12-31-19 what was the present value of Austin’s obligation?
20. (4 points) On 12-31-20 J entered into an agreement allowing J to collect the following:
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Starting 12-31-21, $1,000 every 12-31 until 2024.
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On 12-31-25, a one-time collection of $2,000.
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Nothing in 2026
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Starting 12-31-27, $500 every 12-31 until 12-31-30.
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How much total cash will J eventually collect?
➢
Assume a market interest rate of 5%. As of 12-31-20, what was the present value of J’s receivable?
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