Suppose that you are receiving an annual payment of $183.00, which will continue indefinitely. The present...

Suppose that you are receiving an annual payment of $183.00, which will continue indefinitely. The present value of this payment is $915.00. What must the interest rate be? Give your answer to two decimals.

Expert Solution

As the payment is to to continue for infinite time so it's a perpetuity.

We know for a perpetuity :-

So, Using the above formula

So, Interest rate is 0.20 or 20%

Rahul Sunny answered 3 years ago

Ryan’s Electronics is doing well recently. Ryan’s annual earnings (expected to continue indefinitely) average $5 million....

Ryan’s Electronics is doing well recently. Ryan’s annual earnings (expected to continue indefinitely) average $5 million. The company has a market beta of 1.5. The market risk premium is 6%, and the rate for government T-bills is 5%. The combined federal-state tax rate is 40%. Ryan’s has $10 million of debt outstanding with a cost of 10%. It is now the end of 2020, and Ryan would like to retrieve part of his investment from Ryan’s Electronics to start a...

If the annual interest rate is 0 percent, the present value of receiving $210 in the...

If the annual interest rate is 0 percent, the present value of receiving $210 in the next year is: Multiple Choice $221. $200. $201. $210.

Suppose the worker is receiving the unemployment payment EI per day if she is unemployed. If...

Suppose the worker is receiving the unemployment payment EI per day if she is unemployed. If she does get employed, she receives wage rate w but no unemployment payments. In an income-leisure diagram, show how you would figure out this worker's (who is eligible for EI) reservation wage. Explain your diagram.

What is the present value of a perpetuity of annual paymentswhere the first payment is...

What is the present value of a perpetuity of annual payments where the first payment is in one year and each payment is $4599.99?

What is the present value of an investment with 10% annual compounding and a payment of...

What is the present value of an investment with 10% annual compounding and a payment of $250 at the end of each year forever?

14.) Suppose that the present annual inflation rate is 3.2% and you project that this will...

14.) Suppose that the present annual inflation rate is 3.2% and you project that this will be the maintained. Recall that the inflation rate is the amount a typical collection of primary goods and services will increase in price each year. This is defined by the national government. How many years will it take for the overall level of prices to be 1.75 times what the level is now? (Hint: This a compound interest situation. You will need to use...

You are scheduled to receive an annual payment of $3,600 in oneyear. This payment will...

You are scheduled to receive an annual payment of $3,600 in one year. This payment will increase by 4% annually forever (you are going to receive the payments at the end of each year forever). The discount rate is 10 percent. What is the present value of these cash flows?

Calculate the present value of the following: a-1. Annual payment of $1,075 for 10 years at...

Calculate the present value of the following: a-1. Annual payment of $1,075 for 10 years at 5% interest. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present Value: a-2. Annual payment of $875 for 15 years at 5% interest. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present Value: a-3. Which option would you prefer? 1. $1,075 a year for 10 years 2. $875 a year for 15 years b-1. Annual payment...

Assume you won the lottery. You have the option of receiving a one-time payment of $75,000...

Assume you won the lottery. You have the option of receiving a one-time payment of $75,000 or 4 yearly payments of $20,000 starting right now. At an interest rate of 10%, which option do you prefer? Show your work.

1.1 Suppose for $1,00 you could buy a 10%, 10-year, annual payment bond or a 10%,...

1.1 Suppose for $1,00 you could buy a 10%, 10-year, annual payment bond or a 10%, 10-year, semi annual payment bond. They are equally risky. which would you prefer? if $1,000 is the proper price for the semi-annual bond, what is the equilibrium price for the annual payment bond? 1.2 What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? what does the fact that it...

Question