What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 20-year annuity of $7,500 per year at the current interest rate of 10 percent per year. What happens to the value of your investment if int
What is the relationship between the
value of an annuity and the level of interest rates? Suppose you just bought a
20-year annuity of $7,500 per year at the current interest rate of 10 percent per
year. What happens to the value of your investment if interest rates suddenly drop
to 5 percent? What if interest rates suddenly rise to 15 percent?
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What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 20-year annuity of $7,500 per year at the current interest rate of 10 percent per year. What happens to the value of your investment if int
А в c D E F G H E An investment offers $6,100 per year for...
А в c D E F G H E An investment offers $6,100 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? 6,100 Payment per year # of years Required rate of return # of years # of years Complete the following analysis. Do not...
What happens when the price level rises? a. Interest rates rise, so firms increase investment. b. Interest rates...
What happens when the price level rises? a. Interest rates rise, so firms increase investment. b. Interest rates rise, so firms decrease investment. c. Interest rates fall, so firms increase investment. d. Interest rates fall, so firms decrease investment. 44. Which of the following shifts money demand to the left? a. an increase in the price level b. a decrease in the price level c. an increase in the interest rate d. a decrease in the interest rate 45. If the world real interest rate exceeds the Canadian real interest...
7. What is the future value of a 25-year ordinary annuity with annu $6,000, evaluated at a 10 percent interest rate...
7. What is the future value of a 25-year ordinary annuity with annu $6,000, evaluated at a 10 percent interest rate? (Annuity, saving for your ordinary annuity with annual payments of rate? (Annuity, saving for your retirement)
Given an interest rate of 6.75 percent per year, what is the value at Year 10...
Given an interest rate of 6.75 percent per year, what is the value at Year 10 of a perpetual stream of $3,500 payments that begin at Year 20? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value at Year 10
1. A potential investment pays $10 per year indefinitely. The appropriate discount rate for the potential...
1. A potential investment pays $10 per year indefinitely. The appropriate discount rate for the potential investor is 10%. How is the present value of this cash flow calculated? 2. Suppose you have a choice of two equally risky annuities, each paying $1,000 per year for 20 years. One is an annuity due, while the other is an ordinary annuity. Which annuity would you choose? 3. Your college has agreed to give you a $10,000 tuition loan. As part of...
(Annuity interest rate) Your folks just called and would like some advice from you. An insurance...
(Annuity interest rate) Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for $36,179.88 that will pay them $4,000 per year for 15 years. They don't have the slightest idea what return they would be making on their investment of $36.179.88. What rate of return would they be earning? %. (Round to two decimal The annual rate of return your folks would be...
Solving for Rates What annual rate of return is earned on a $2,000 investment when it...
Solving for Rates What annual rate of return is earned on a $2,000 investment when it grows to $4,500 in eleven years? Present Value of an Annuity Due If the present value of an ordinary, 5-year annuity is $6,600 and interest rates are 11 percent, what's the present value of the same annuity due? Dividend Initiation and Stock Value A firm does not pay a dividend. It is expected to pay its first dividend of $0.80 per share in 2...
Assuming that the current interest rate is 6 percent, compute the present value of a five-year,...
Assuming that the current interest rate is 6 percent, compute the present value of a five-year, 10 percent coupon bond with a face value of $1,000. What happens when the interest rate goes to 7 percent? What happens when the interest rate goes to 5 percent? Instructions: Enter your responses rounded to the nearest penny (two decimal places). PV at an interest rate of 6%-$ PV at an interest rate of 7%-$ The present value (Click to select) when the...
INTEREST RATE (percent per year) 0 | | | | | | | | 10 20...
INTEREST RATE (percent per year) 0 | | | | | | | | 10 20 30 40 50 60 70 80 PLANNED INVESTMENT SPENDING (billons of dollars per year) Figure 9.5 In Lic IULIE 9.5, a movement from Point A to Point B would result from Multiple Choice A decrease in wage costs. An increase in the interest rate. o An increase in disposable income. o o An improvement in expectations for future sales.
If the present value of a 10-year ordinary is $8,475 and interest rates are 7.3 percent,...
If the present value of a 10-year ordinary is $8,475 and interest rates are 7.3 percent, what is the present value of the same annuity due? (ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS AND COMMAS. ROUND YOUR ANSWER TO 2 DECIMAL PLACES.)
А в c D E F G H E An investment offers $6,100 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? 6,100 Payment per year # of years Required rate of return # of years # of years Complete the following analysis. Do not...
7. What is the future value of a 25-year ordinary annuity with annu $6,000, evaluated at a 10 percent interest rate? (Annuity, saving for your ordinary annuity with annual payments of rate? (Annuity, saving for your retirement)
Given an interest rate of 6.75 percent per year, what is the value at Year 10 of a perpetual stream of $3,500 payments that begin at Year 20? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value at Year 10
1. A potential investment pays $10 per year indefinitely. The appropriate discount rate for the potential investor is 10%. How is the present value of this cash flow calculated? 2. Suppose you have a choice of two equally risky annuities, each paying $1,000 per year for 20 years. One is an annuity due, while the other is an ordinary annuity. Which annuity would you choose? 3. Your college has agreed to give you a $10,000 tuition loan. As part of...
(Annuity interest rate) Your folks just called and would like some advice from you. An insurance agent just called them and offered them the opportunity to purchase an annuity for $36,179.88 that will pay them $4,000 per year for 15 years. They don't have the slightest idea what return they would be making on their investment of $36.179.88. What rate of return would they be earning? %. (Round to two decimal The annual rate of return your folks would be...
Assuming that the current interest rate is 6 percent, compute the present value of a five-year, 10 percent coupon bond with a face value of $1,000. What happens when the interest rate goes to 7 percent? What happens when the interest rate goes to 5 percent? Instructions: Enter your responses rounded to the nearest penny (two decimal places). PV at an interest rate of 6%-$ PV at an interest rate of 7%-$ The present value (Click to select) when the...
INTEREST RATE (percent per year) 0 | | | | | | | | 10 20 30 40 50 60 70 80 PLANNED INVESTMENT SPENDING (billons of dollars per year) Figure 9.5 In Lic IULIE 9.5, a movement from Point A to Point B would result from Multiple Choice A decrease in wage costs. An increase in the interest rate. o An increase in disposable income. o o An improvement in expectations for future sales.
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