Financial Accounting Assignment Solved Solution Sample

QUESTIONB

 

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.

 

ANSWER

 

1. 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?

 

Total Payment : 11,000,000

No. of periods : 26

Annual Installments : 11,000,000/26 = 423076.9

Annual interest rate = 9%

Effective interest rate since compounded monthly =( (1+9%/12)^12-1) =9.3807%

Present value = P*((1-(1+r)^-n)/r)

 

 

Where p is annual instalment

R is effective interest rate

n is no. of installments

 

 

=423076.9*(1-(1+9.3807%)^-26)/9.3807%)

=4071828

1. 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.

	Company	Strengths	Weakness
AAA	Johnson And Johnson, Microsoft	Excellent Financial Conditions, Solid Strategy and Vision for Future	No Weakness
BBB	Mattle Inc.	Moderate Level Financials	Lowest Hung investment grade Bond, Investors must be cautious while Investing
CCC	Anglo American PLC	Sustainable for Short Period	Poor Financials, Junk Grade Investments
D	Martin Marietta Materials	No Strengths	Not advisable for investments, Risky and Manipulative financials

 

References

https://www.thebalance.com/u-s-companies-rated-aaa-higher-than-u-s-government-bonds-417105

https://ratingagency.morningstar.com/

https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-list.html