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An Investment Offers $10,000 at the End of Each Year

question 36

Essay

An investment offers $10,000 at the end of each year for ten years. (a)If you can earn 5 percent annually, what is this investment worth today? (b)If you do not spend the annual payment but invest it at 5 percent, how much will you have after the ten years have lapsed?


Definitions:

Par

The face value of a stock or bond, which is the amount stated on the certificate or instrument itself.

Treasury Stock

Securities initially distributed and subsequently bought back by the issuer, which lowers the quantity of shares actively traded on the market.

Common Stock

Equity securities that represent ownership in a corporation, giving shareholders voting rights and a residual claim on corporate earnings in the form of dividends.

Authorized

Pertains to the maximum number of shares a corporation is legally permitted to issue, as specified in its charter.

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