Homework Answers
| Computation of the Value of Annual Perpuity | |||||||||
| Step.1 Since we have been provided with the present value of the perpetuity payable after 4 years, therefore to arrive at the value of perpuity we need to consider the future Value of the given amount | |||||||||
| FV = PV*(1+Interest rate)^N | =($125000*(1+0.075)^4 = | $ 166,933.64 | |||||||
| Step.2 The amount payable annually shall be computed as a percentage of annual interest rate of the perpuity amount | |||||||||
| = $166933.64* 7.5% = | $ 12,520.02 | ||||||||
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9. A perpetuity will pay X every year. The effective annual interest...
At an effective annual interest rate of , , the following two sets of payments have...
At an effective annual interest rate of
,
, the following two sets of payments have the same present
value:
(i) A payment of 64 immediately and another payment of 64 at the
end of 1 year
(ii) A payment of 125 at the end of 3 years and another payment
of 125 at the end of four years
Compute the effective rate of discount
equivalent to
We were unable to transcribe this imageWe were unable to transcribe this imageWe...
Please show the work/formulas. Problem 26.30 | 3.570 At an annual effective interest rate of i,...
Please show the work/formulas.
Problem 26.30 | 3.570 At an annual effective interest rate of i, the present value of a perpetuity- immediate starting with a payment of 200 in the first year and increasing by 50 each year thereafter is 46,530. Calculate i. Problem 27.1 1825.596 A 20 year increasing annuity due pays 100 at the start of year 1, 105 at the start of year 2, 110 at the start of year 3, etc. In other words, each...
A perpetuity-due paying 5 every year has a present value of 90. An annuity-immediate paying 10...
A perpetuity-due paying 5 every year has a present value of 90. An annuity-immediate paying 10 monthly for 5 years has the same effective rate of interest what is the present value of this annuity? Hint: To calculate the monthly annuity, you should find the present value of a 60 payment annuity using the monthly effective rate of interest that is equivalent to to the annual effective rate of interest that you derived from the perpetuity. That is find i...
please explain the ubderlined step and include the formula used to get there 3. A perpetuity-immediate...
please explain the ubderlined step and include the formula
used to get there
3. A perpetuity-immediate pays 100 per year. Immediately after the fifth payment, the perpetuity is exchanged for a 25-year annuity-immediate that will pay X at the end of the first year. Each subsequent annual payment will be 8% greater than the preceding payment. The annual effective rate of interest is 8%. Calculate X. (A) 54 (B) 64 (C) 74 (D) 84 (E) 94 PV = 100 w...
Calculate X . You are buying a perpetuity with annual payments as follows Payment of X...
Calculate X .
You are buying a perpetuity with annual payments as follows Payment of X at the end of the first year and every three years thereafter. Payment of X+1 at the end of the second year and every three years thereafter. Payment of X+2 at the end of the third year and every three years thereafter The interest rate is 5% convertible semi-annually. If the present value is 40, Calculate
Calculate X You are buying a perpetuity with annual payments as follows Payment of X at...
Calculate X
You are buying a perpetuity with annual payments as follows Payment of X at the end of the first year and every three years thereafter. Payment of X+1 at the end of the second year and every three years thereafter. Payment of X+2 at the end of the third year and every three years thereafter The interest rate is 5% convertible semi-annually. If the present value is 40, Calculate
an increasing perpetuity immediate makes annual payments. the first payment is 100 and each subsequent payment...
an increasing perpetuity immediate makes annual payments. the first payment is 100 and each subsequent payment is larger than the preceding payment by an amount X. based on an annual effective interest rate of 10%, the present value of the perpetuity at time 0 is one half of its present value at time 20. what is rhe value of x?
Course: Theory of Interest FM) A perpetuity is purchased for $7,000. It's first annual payment of...
Course: Theory of Interest FM) A perpetuity is purchased for $7,000. It's first annual payment of $200 will occur five years from now. Each subsequent payment is increased by an amount C from the previous payment (the payments as 200, 200 + C, 200 + 2C, ...). If the effective annual interest rate is 4% find the value of C. Answer: $4.3615664730
Dake is receiving a perpetuity due with annual payments. The payments are $1,000 at the beginning...
Dake is receiving a perpetuity due with annual payments. The payments are $1,000 at the beginning of each year except the payment at the beginning of every fifth year is $6,000. In other words, the first four payments at $1,000 with the fifth payment being $6,000. This is followed by four more payments of $1,000 and then a fifth payment of $6,000. This pattern continues forever. Using an annual effective interest rate of 8%. Calculate the present value of this...
(1 point) Problem 3 -Unknown and Varying Interest At an annual effective rate of interest i, the following 2 payment streams have equal present values. (i) $550 paid at the end of each year for 1...
(1 point) Problem 3 -Unknown and Varying Interest At an annual effective rate of interest i, the following 2 payment streams have equal present values. (i) $550 paid at the end of each year for 13 years. (i) A 13-year deferred perpetuity-immediate of $275 per year (i.e. first payment at time 14) Determine the effective annual rate of interest
(1 point) Problem 3 -Unknown and Varying Interest At an annual effective rate of interest i, the following 2 payment streams...
At an effective annual interest rate of
,
, the following two sets of payments have the same present
value:
(i) A payment of 64 immediately and another payment of 64 at the
end of 1 year
(ii) A payment of 125 at the end of 3 years and another payment
of 125 at the end of four years
Compute the effective rate of discount
equivalent to
We were unable to transcribe this imageWe were unable to transcribe this imageWe...
Please show the work/formulas.
Problem 26.30 | 3.570 At an annual effective interest rate of i, the present value of a perpetuity- immediate starting with a payment of 200 in the first year and increasing by 50 each year thereafter is 46,530. Calculate i. Problem 27.1 1825.596 A 20 year increasing annuity due pays 100 at the start of year 1, 105 at the start of year 2, 110 at the start of year 3, etc. In other words, each...
please explain the ubderlined step and include the formula
used to get there
3. A perpetuity-immediate pays 100 per year. Immediately after the fifth payment, the perpetuity is exchanged for a 25-year annuity-immediate that will pay X at the end of the first year. Each subsequent annual payment will be 8% greater than the preceding payment. The annual effective rate of interest is 8%. Calculate X. (A) 54 (B) 64 (C) 74 (D) 84 (E) 94 PV = 100 w...
Calculate X .
You are buying a perpetuity with annual payments as follows Payment of X at the end of the first year and every three years thereafter. Payment of X+1 at the end of the second year and every three years thereafter. Payment of X+2 at the end of the third year and every three years thereafter The interest rate is 5% convertible semi-annually. If the present value is 40, Calculate
Calculate X
You are buying a perpetuity with annual payments as follows Payment of X at the end of the first year and every three years thereafter. Payment of X+1 at the end of the second year and every three years thereafter. Payment of X+2 at the end of the third year and every three years thereafter The interest rate is 5% convertible semi-annually. If the present value is 40, Calculate
(1 point) Problem 3 -Unknown and Varying Interest At an annual effective rate of interest i, the following 2 payment streams have equal present values. (i) $550 paid at the end of each year for 13 years. (i) A 13-year deferred perpetuity-immediate of $275 per year (i.e. first payment at time 14) Determine the effective annual rate of interest
(1 point) Problem 3 -Unknown and Varying Interest At an annual effective rate of interest i, the following 2 payment streams...
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