# Financial Management 2

Feedback last Assignment 1

Great job on this assignment. You did good with showing your work. Your answers were a bit out of order but you have all of the questions answered. You did a great job citing but you need to make sure your references are formatted correctly. Keep up the good work. 😊

Homework Set #2: Chapters 4 & 5 Due Week 4 ( Due date 04/28 )

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.

A. You have just won the Strayer Lottery jackpot of \$11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

B. In your own words and using various bond websites, please locate one of each of the following bond ratings: AAA, BBB, CCC, and D. Please describe the differences between the bond ratings. Identify the strengths and weaknesses of each rating.

3 Example A. **Could you create the new one for me, as below I find the Internet that it is plagiarism**

A. You have just won the Strayer Lottery jackpot of \$11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

1. Strayer Lottery Jackpot

Jackpot \$11,000,000

Annual Installments 26

Interest Rate 9%

PV ?

Monthly

Compounded

Installments 312

Interest Rate 0.75%

PV of payment \$1,068,896.32

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2. Quoted Annual Interest Rate = 9%

Compounded Period = 12 periods in a year

Monthly Compounded interest rate = 0.075 (9%/12)

Calculate Effective Percentage Rate (EFF)

EFF =(1+0.0075) ^ 12 – 1.0

(1.0075)^12 -1.0

1.093807 – 1.0

0.093807

9.3807%

Future Value No. of periods

\$11,000,000/26 periods = \$423,076.92

Calculate Present Value

PV = (rate,nper,pmt,fv,type)

Rate = 0.093807

No. periods = 26

Pmt = 423,076.92

Future Value = 0

Type = 1

PV = (0.09387, 26, 423,076.92, 0, 1)

PV = \$4,453,789.94

The present value of the payments you will receive is \$4,453,789.94.

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3. The formula for the present value of an anuallity is:

PV = A * [ 1 – (1 + r) ^ (-n) ] / r

Here:

A = 11000000 / 26 = 423076.92

r is the effective rate of 9% monthly compounded

r = (1 + 0.09/12) ^ (12) – 1 = 1.0938 – 1 = 0.0938

n = 26

Then, PV =  423,076.92 * [1 – (1+0.0938)^(-26) ] / (0.0938)

PV = 4,072,055.25

(Comment Exam 3 is “This was closer than what I came up with. The answer when we went over it in class was \$4,453.789.94. Only 1 person we were told got it right.”)

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