Question
In: Finance
(i). You are 20 years old. What is the fair price for a perpetuity that begins...
(i). You are 20 years old. What is the fair price for a perpetuity that begins to pay you $2,000
annually from when you become 60 years old, assuming a 5% market interest rate? (the
payment starts at the end of 60 years.)
(ii). What is the fair price if the financial product is not a perpetuity but an annuity which
pays $2,000 per year during your ages from 60 to 100 years (again at a 5% interest rate)?
Q _ Why is the price differential between the perpetuity in (i) and the annuity in (ii) is not
that large?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You are 20 years old and plan to purchase a house when you are 35 .a....
You are 20 years old and plan to purchase a house when you are
35
.a. The current price of the house you want to purchase is
$275,000 and the price is expected to increase by 3% per year. How
much will the house cost when you are 35?
b. When you are 35, the bank will require a cash down-payment of
10% of the house price to obtain a mortgage. How much will you need
to save each year...
What is the yield to maturity on a perpetuity that has a price of $2,079 and...
What is the yield to
maturity on a perpetuity that has a price of $2,079 and pays $106
annually forever?
Please round your
answer to the fourth decimal. E.g. 0.1234
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.)
$
You are 20 years old now and you will save $10,000 annually for the next 30...
You are 20 years old now and you will save $10,000 annually for
the next 30 years and the interest rate is 9%. How much money you
will have when you are 50 years old?
A.
$1,363,075.39
B.
$899,937.73
C.
$1,112,577.83
D.
$998,181.47
What is the PV of $2,000 to be received in 10 years at an
interest rate of 8%?
A.
$980.25
B.
$926.39
C.
$783.12
D.
$1,000
Korra is 40 years old and Sokka is 20 years old. Both work in the same...
Korra is 40 years old and Sokka is 20 years old. Both work in
the same position in the same company and have been laid off
permanently. If they enroll together in the same college, to study
the same. Given the human capital model, do they have the same net
value present?
You decide that, starting when you are 20 years old, you will save $5 a day...
You decide that, starting when you are 20 years old, you will
save $5 a day for retirement. At the end of the year, you invest
the accumulated savings ($1,825) in a brokerage account with an
expected annual return of 8%. If you continue the practice every
year until you are 65, how much money will you have? Please use two
decimals rounded up.
What is the price of the bond if the coupon rate is 6%, has 20 years...
What is the price of the bond if the coupon rate is 6%, has 20
years left to maturity and the YTM is 6%?
If the variance for a stock return is 0.0148 then the standard
deviation is?
You are 20 years old and you want to retire when you have saves$1 million....
You are 20 years old and you want to retire when you have saves
$1 million. You have inherited $250,000 and will not add any other
savings to that amount. The money will be conservatively invested
at 6% per annum. At what age will you be able to retire a
millionaire?
2. You are 20 years old and anitcipate you will have your first child when you...
2. You are 20 years old and anitcipate you will have your
first child when you are 25 years old. At 25 years old, you want to
save at the end of each month for the next 18 years. You anticipate
that when your child goes to college, tuition room and board to be
paid at the beginning of each year will cost $20,000. Education
inflation is expected to be at 4% each year. If you can earn 8.5%
on...
2. You are 20 years old and anitcipate you will have your first child when you...
2. You are 20 years old and anitcipate you will have your first
child when you are 25 years old. At 25 years old, you want to save
at the end of each month for the next 18 years. You anticipate that
when your child goes to college, tuition room and board to be paid
at the beginning of each year will cost $20,000.
Education inflation is expected to be at 4% each year. If you can
earn 8.5% on...
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