A contract for debt imposes on one a company to pay a person monthly payment of $100 for as long as it remains in business. This company faces no known risk of bankruptcy and therefore has no definite life (yes, companies can “live” forever). The beneficiary of this contract, the person receiving the payments, is planning to sell the rights in this contract (because he thinks he cannot live forever) and received three offers of payments now: [a] $200 [b] $1,000 [c] $10,000 What is the implied time value of money (monthly interest rate) in each offer?

A contract for debt imposes on one a company to pay a person monthly payment of $100 for as long as it remains in business. This company faces no known risk of bankruptcy and therefore has no definite life (yes, companies can “live” forever). The beneficiary of this contract, the person receiving the payments, is planning to sell the rights in this contract (because he thinks he cannot live forever) and received three offers of payments now: [a] $200 [b] $1,000 [c] $10,000 What is the implied time value of money (monthly interest rate) in each offer?

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter4: Gross Income

Section: Chapter Questions

Problem 4CE

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