Homework Answers
Year 3
The present is brought to the beginning of the year. The present value will be at the beginning of year 4 which is equivalent to end of year 3. Therefore, PV will be at year 3.
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Assume an annuity will pay $1,000 a year for five years with the first payment occurring...
Christina will receive annuity payments of $1,200 a year for five years, with the first payment...
Christina will receive annuity payments of $1,200 a year for five years, with the first payment occurring at Year 4. What is the value of this annuity to her today at a discount rate of 7.25 percent? Select one: A. $4,209.19 B. $4,111.08 C. $4,774.04 D. $3,961.80 E. $4,887.48
consider a ten‐cash‐flow annuity, with the first $800 cash flow occurring at t = 9 years...
consider a ten‐cash‐flow annuity, with the first $800 cash flow occurring at t = 9 years and the tenth $800 cash flow occurring 18 years from today. (1) Specifically using ten single‐sum (single‐cash‐flow) equations and a discount rate of 4%/year, calculate the value of this annuity 9 years from now. (2) Specifically using a PV‐of‐annuity equation and a discount rate of 4%/year, calculate the value of this same annuity nine years from now. (3) Specifically using nothing but Excel’s prepackaged...
An investment will pay $5,000 per year for 10 years, with the first payment occurring one...
An investment will pay $5,000 per year for 10 years, with the first payment occurring one year from today. A. If the interest rate is 6%, what is the value of this investment today? B. What would the value of the investment be if the $5,000 annual cash flow lasts 20 years (and the interest rate is still 6%)? C. How come the value of the investment IS NOT twice as much in part B as compared to part A?...
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity...
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the end of every six mońths O An annuity that pays $1,000 at the...
7. Present value of annuities and annuity payments Aa Aa The present value of an annuity...
7. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $1,000 at the end of each year An annuity that pays $1,000 at the beginning of each...
The Smiths have bought an investment which will pay them $1,000 per year for five years....
The Smiths have bought an investment which will pay them $1,000 per year for five years. Ajax Brokers has just offered to buy the annuity from the Smiths for $4,200. If the Smiths require a rate of return of 7% per year, should they sell? A. Yes, because the offer exceeds the present value of $4,100. B. Yes, because the offer exceeds the PV of $3,740. C. No, because the offer is less than the PV of...
3. An investment offers $6,967 per year for 2 years, with the first payment occurring one...
3. An investment offers $6,967 per year for 2 years, with the first payment occurring one year from today. If the required return is 7% what is the present value of the investment? Show your work.
An annuity is set up that will pay $1,700 per year for nine years. What is...
An annuity is set up that will pay $1,700 per year for nine years. What is the present value (PV) of this annuity given that the discount rate is 4%? O A. $12,640 O B. $15,168 OC. $17,696 OD. $7,584
Which one of these payment streams fits the definition of an annuity due? O A preferred...
Which one of these payment streams fits the definition of an annuity due? O A preferred stock pays a $2 quarterly dividend. O A 4-year car loan requires the last monthly payment be paid at the end of Year 4. O A 20-year bond pays semiannual interest with the first payment occurring six months after issuance. O A prize pays $1,000 a year for ten years, starting today.
1. What is the value today of receiving $2,422.00 per year forever? Assume the first payment...
1. What is the value today of receiving $2,422.00 per year forever? Assume the first payment is made next year and the discount rate is 12.00%. 2. What is the value today of receiving $1,429.00 per year forever? Assume the first payment is made 6.00 years from today and the discount rate is 4.00%. 3. If you are willing to pay $42,377.00 today to receive $4,353.00 per year forever then your required rate of return must be ____%. Assume the...
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the end of every six mońths O An annuity that pays $1,000 at the...
7. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $1,000 at the end of each year An annuity that pays $1,000 at the beginning of each...
An annuity is set up that will pay $1,700 per year for nine years. What is the present value (PV) of this annuity given that the discount rate is 4%? O A. $12,640 O B. $15,168 OC. $17,696 OD. $7,584
Which one of these payment streams fits the definition of an annuity due? O A preferred stock pays a $2 quarterly dividend. O A 4-year car loan requires the last monthly payment be paid at the end of Year 4. O A 20-year bond pays semiannual interest with the first payment occurring six months after issuance. O A prize pays $1,000 a year for ten years, starting today.
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