Question
In: Finance
A local bank is running the following advertisement in the newspaper: "For just $5,000we will pay...
A local bank is running the following advertisement in the newspaper: "For just $5,000we will pay you$250forever!" The fine print in the ad says that for a $5,000
deposit, the bank will pay $250 every year in perpetuity, starting one year after the deposit is made. What interest rate is the bank advertising (what is the rate of return of this investment)?
Solutions
Expert Solution
The equations for a perpetuity and annuity are derived from the assumption that the first cash flow will occur 1-‐period ahead in time.
jeff jeffy answered 2 years agoRelated Solutions
1. A local bank is running the following advertisement in the newspaper: "For just $ 4,000...
1. A local bank is running the following advertisement in the
newspaper: "For just $ 4,000 we will pay you $ 240forever!" The
fine print in the ad says that for a $ 4,000 deposit, the bank will
pay $ 240every year in perpetuity, starting one year after the
deposit is made. What interest rate is the bank advertising (what
is the rate of return of this investment)?
The interest rate the bank is advertising is.....?% (round to
nearest integer.)
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In the USA, Read the following advertisement that appeared in
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IRS TAX TERMINATOR, A Professional Services Corporation We have
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IRS TAX TERMINATOR, A Professional Services Corporation We have
ten CPAs on staff and provide a full range of tax services. We
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ten CPAs on staff and provide a full range of tax services. We
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