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Assume that you are going to receive $500,000 in 10 years. The current market rate...

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Accounting

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Assume that you are going to receive $500,000 in 10 years. The current market rate of interest is 6%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $500,000 to be received in the future? The present value is less due to the compounding of interest over the 10 years. Present Value of an Annuity On January 1, you win $800,000 in the state lottery. The $800,000 prize will be paid in equal installments of $80,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31. If the current interest rate is 5%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar. Present Value of Bonds Payable; Premium Moss Co. issued $590,000 of five-year, 12% bonds, with interest payable semiannually, at a market (effective) interest rate of 10%. Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar

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