Question

In: Finance

Find the present value of payments of $200 every six months starting immediately and continuing through...

Find the present value of payments of $200 every six months starting immediately and continuing through four years from the present, and $100 every six months thereafter through ten years from the present, if i (2) = 0.06.

Solutions

Expert Solution

First, Calculating the Present Value today of the $200 payment received every 6 months starting immediately and continuing through four years from the present.

Where, C= Periodic Payments = $200

r = Periodic Interest rate = 0.06/2 = 0.03

n= no of periods = 4 years*2 =8

Present Value = $1446.06

Now for the payment starting after 4 years, first we will calculate the present value at year 4 of the periodic paymnets and then we will discount it for 4 years to have its present value today.

Where, C= Periodic Payments = $100

r = Periodic Interest rate = 0.06/2 = 0.03

n= no of periods of payments = 6 years*2 =12

m = no of periods of discounting = 4 years*2 = 8

Present Value = $809.35

So, Present Value today of both payments = $1446.06 + $809.35

= $2255.41

If you need any clarification, you can ask in comments.     

If you like my answer, then please up-vote as it will be motivating     

Present Value = $1446.06


Related Solutions

Find the present value of payments of $250 every six months starting immediately and continuing through...
Find the present value of payments of $250 every six months starting immediately and continuing through 6 years from the present, and $200 every six months thereafter through 12 years from the present. if i^(2) = 4%.
What is the present value of an ordinary annuity that pays $300 every six months for...
What is the present value of an ordinary annuity that pays $300 every six months for four years if the discount rate is 5.6% per year? Question 5 options: A) $1,994.34 B) $2,109.56 C) $2,123.79 D) $2,098.25 E) $2,281.41
Find the accumulated value of monthly payments of $500 starting one period from today and continuing...
Find the accumulated value of monthly payments of $500 starting one period from today and continuing through 5 years from today, with a nominal annual rate of 4.5% compounded monthly.
2 Assume that a bond will make payments every six months as shown on the following...
2 Assume that a bond will make payments every six months as shown on the following timeline​ (using six-month​ periods): The timeline starts at Period 0 and ends at Period 50. The timeline shows a cash flow of $ 19.31 each from Period 1 to Period 49. In Period 50, the cash flow is $ 19.31 plus $ 1,000. Period012nothing4950 Cash Flows nothing$ 19.31$ 19.31nothing$ 19.31$ 19.31 plus $ 1,000 a. What is the maturity of the bond​(in years)? b....
Sam buys a perpetuity paying $5,000 every three years, starting immediately. He deposits the payments into...
Sam buys a perpetuity paying $5,000 every three years, starting immediately. He deposits the payments into a savings account earning interest at an effective interest rate of 5%. Twelve years later, before receiving the fifth payment, Sam sells the perpetuity based on an effective annual interest rate of 5%. Using proceeds from the sale plus the money in the savings account, he purchases an annuity paying P at the end of every two years for twenty years at an annual...
Tom receives pension payments of $6000.00 at the end of every six months from a retirement...
Tom receives pension payments of $6000.00 at the end of every six months from a retirement fund of $90 000.00. The fund earns 8.00% compounded semi-annually. a) How many payments will Tom receive? b) What is the size of the final pension payment?
Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods)
Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods):The timeline starts at Period 0 and ends at Period 50. The timeline shows a cash flow of $ 20.92 each from Period 1 to Period 49. In Period 50, the cash flow is $ 20.92 plus $ 1,000.Period0124950Cash Flows$20.92$20.92$20.92$20.92+$1,000a. What is the maturity of the bond (in years)?b. What is the coupon rate (as a percentage)?c. What is the face value?
What is the present value of an annuity consisting of 5 annual payments of $200 with...
What is the present value of an annuity consisting of 5 annual payments of $200 with an interest rate of 8% p.a. compounded annually and the first payment made immediatel a $889.68 B) $643.77 C) $862.43 D) $798.54
What is the present value of an annuity consisting of 5 annual payments of $200 with...
What is the present value of an annuity consisting of 5 annual payments of $200 with an interest rate of 8% p.a. compounded annually and the first payment made immediatel a $889.68 B) $643.77 C) $862.43 D) $798.54
What is the value today of a money machine that will pay $3,129.00 every six months...
What is the value today of a money machine that will pay $3,129.00 every six months for 13.00 years? Assume the first payment is made 3.00 years from today and the interest rate is 14.00%. Answer format: Currency: Round to: 2 decimal places.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT