Nara inherits a perpetuity from her grandfather that will pay here $2000 today and every year...

Nara inherits a perpetuity from her grandfather that will pay here $2000 today and every year forever. The annual interest rate is 3%.

a) How much is Nara's inheritance worth?

Nara decides to sell the perpetuity (for its present value) and instead buy an annuity due paying $P for the next 22 years.

b) What is $P?

She changes her mind again, and decides instead on an annuity due paying $4000 per year for n years, except for the last (nth) payment which is a drop payment.

c) What is n?

d) What is the amount of the final payment?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Sophia inherits inherited money from her grandparents. She inherits $100,000 from her grandparents, today. She has...

Sophia inherits inherited money from her grandparents. She inherits $100,000 from her grandparents, today. She has exactly 20 years to retire and she decided to put the entire amount into 20 years, 4% annual interest annuity. A) Assume that she did not deposit any additional amount into this account, compute your account balance by the time she retires. Please compute the problem using a scientific calculator (not a financial one) using the appropriate formulas and show your calculations step by...

Gabriela inherits money from her aunt. She gets $100,000 from her aunt, today. She have exactly...

Gabriela inherits money from her aunt. She gets $100,000 from her aunt, today. She have exactly 20 years to retire and she decided to put the entire amount into 20 years, 4% annual interest annuity.” A. The answer to this problem is $219,112.31. A total principle of $100,000.00 and total interest of $119,112.31. Show work with finance formulas like annuity step by step for this problem to get this answer. b.Next assume that in addition to this initial $100,000, she...

Jake inherits a perpetuity that will pay him $10,000 at the end of the first year increasing by $10,000 per year until a payment of $150,000 is made at the end of the fifteen year.

Jake inherits a perpetuity that will pay him $10,000 at the end of the first year increasing by$10,000 per year until a payment of $150,000 is made at the end of the fifteen year. Paymentsremain level after the fifteenth year at $150,000 per year. Determine the present value of thisperpetuity, assuming a 7.5% annual interest rate.

A perpetuity will pay $1,025 per year, starting five years after the perpetuity is purchased

A perpetuity will pay $1,025 per year, starting five years after the perpetuity is purchased. What is the present value of this perpetuity on the date that it is purchased, given that the interest rate is 9%. Show your work or inputs.

A perpetuity will pay $700 per year, starting 6 years after the perpetuity is purchased.

A perpetuity will pay $700 per year, starting 6 years after the perpetuity is purchased. What is the present value (PV) of this perpetuity on the day that it is purchased (conside this time 0), given that the annual interest rate is 5%? $10,447.02 $10,969.37 $522.35 $14,000.00

A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What...

A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What is the present value (in $) of this perpetuity on the date that it is purchased, given that the interest rate is 4%? (Round your answer to the nearest cent.) $

Ariana contributed $100 from her pay cheque at the beginning of every month from age 18...

Ariana contributed $100 from her pay cheque at the beginning of every month from age 18 to 65 into an RRSP account (no contribution in the month of her 65th birthday). Macy contributed $4000 at the beginning of every year from age 35 to 55 into a similar RRSP account, then leave the money in the fund to accumulate for another 10 years(no contribution in the year of her 55th birthday). money earned 4.8% compounded daily in both RRSP accounts....

A perpetuity of $5,000 per year beginning two years from today offers a 15% annual return....

A perpetuity of $5,000 per year beginning two years from today offers a 15% annual return. What is its present value?

You can afford to pay up to $2000 in payments every month for housing and have...

You can afford to pay up to $2000 in payments every month for housing and have $80,000 in savings (you don't anticipate and increase in income/savings). Which of the following mortgages would allow you to buy the most expensive property? A 25 year FRM with 2.5% contract interest rate and .9 LTV. A 30 year fully amortizing FRM with 4.2% contract interest rate and .85 LTV. A 30 year FRM with 4.2% contract interest rate, .9 LTV and a balloon...

A project will cost $1,000 today and will pay back $100 one year from today (t=1),...

A project will cost $1,000 today and will pay back $100 one year from today (t=1), $200 two years from today (t=2), $500 three years from today (t=3) and $1,000 four years from today (t=4). If the required rate of return is 7%, answer question Q1 to Q5. Q1: What is the present value of the future cashflow? a)1578.62 b)1439.19 c)1374.25 d)1664.83 Q2: What is the NPV of the project a)439.19 b)1439.19 c)578.62 d)1374.25 Q3: What is the IRR of...

Subjects