9. A 5-year $150 ordinary annuity has an annual interest rate of 8%. What is its...

9. A 5-year $150 ordinary annuity has an annual interest rate of 8%. What is its present value?

What would the present value be if it was a 10-year annuity?

What would the present value be if this was a perpetuity?

Solutions

Expert Solution

a.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=150[1-(1.08)^-5]/0.08

=150*3.99271004

=$598.91(Approx)

b.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=150[1-(1.08)^-10]/0.08

=150*6.7100814

=$1006.51(Approx)

c.Present value of perpetuity=Annual cash flows/interest rate

=150/0.08

=$1875

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

A 5-year, $100 ordinary annuity has an annual interest rate of 4%.

A 5-year, $100 ordinary annuity has an annual interest rate of 4%. 1. What is its present value? 2. What would the present value be if it was a 10-year annuity? 3. What would the present value be if it was a 25-year annuity? 4. What would the present value be if this was a perpetuity?

What is the future value of a 14-year ordinary annuity of $450 if the interest rate...

What is the future value of a 14-year ordinary annuity of $450 if the interest rate is 6%? Q11b – What is the present value of the annuity? Hint: Solve for PV. Q11c – What is the future value and present value if the annuity were an annuity due? Solve.

What is the future value of a 5-year ordinary annuity of $1000 if the appropriate interest...

What is the future value of a 5-year ordinary annuity of $1000 if the appropriate interest rate is 5%? What is the present value of the annuity? What is the future value of $1000 after 4 years under 10% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 5%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?

What is the present value of a 8-year ordinary annuity with annual payments of $538, evaluated...

What is the present value of a 8-year ordinary annuity with annual payments of $538, evaluated at a 6 percent interest rate? Round it to two decimal places, i.e., 1234.45.

What is the future value of a 5-year ordinary annuity with annual payments of $339, evaluated...

What is the future value of a 5-year ordinary annuity with annual payments of $339, evaluated at a 10 percent interest rate? (Do not include the dollar sign ($), and round your answer to 2 decimal places: for example, 536.34)

A 50-year annuity with an annual interest rate of 8%. In the first 20 years, $1000...

A 50-year annuity with an annual interest rate of 8%. In the first 20 years, $1000 was deposited at the beginning of each year, and in the next 30 years, $1400 was deposited at the beginning of each year. Calculate the value of this annuity at the end of the 40th year.

What is the future value of a five-year ordinary annuity of $1,000 per year if the interest rate is 4.30%? Hint: solve for year 5.

Question 10 What is the future value of a five-year ordinary annuity of $1,000 per year if the interest rate is 4.30%? Hint: solve for year 5. Question 11 What is the present value of a perpetuity that offers to pay $100 next year and every year after the payment grows at 4.9%. Investments with similar risk are offering an 8% annual return.

Suppose the present vaule of a 5 year ordinary annuity is $528, if the discount rate...

Suppose the present vaule of a 5 year ordinary annuity is $528, if the discount rate is 14%, what must the annual cash flow be?

What is the price of a 5 year bond with a 8% annual coupon rate and...

What is the price of a 5 year bond with a 8% annual coupon rate and face value of $1,000? The prevailing market annual interest rate is 2%. Coupons are to be paid annually.

Future Value: Ordinary Annuity versus Annuity Due What is the future value of a 3%, 5-year...

Future Value: Ordinary Annuity versus Annuity Due What is the future value of a 3%, 5-year ordinary annuity that pays $800 each year? Round your answer to the nearest cent. $ If this were an annuity due, what would its future value be? Round your answer to the nearest cent. $

Subjects