How much more is a perpetuity of $1000 worth than an annuity of the same amount...

How much more is a perpetuity of $1000 worth than an annuity of the same amount for 18 years? Assume an interest rate of 8% and cash flows at the end of each period.

Expert Solution

Present value of perpetuity=Annual cash flows/interest rate

=1000/0.08

=$12500

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

=1000[1-(1.08)^-18]/0.08

=1000*9.37188714

=$9371.89(Approx)

Hence excess value=12500-9371.89

=$3128.11(Approx)

jeff jeffy answered 2 years ago

How much more is a perpetuity of 1000 worth than an annuity of the same amount for 19 years?

How much more is a perpetuity of 1000 worth than an annuity of the same amount for 19 years? Assume an interest rate of 8% and cash flows at the end of each year.

How much more is a perpetuity of $1600 worth than an annuity of the same amount...

How much more is a perpetuity of $1600 worth than an annuity of the same amount for 24 years? Assume an annual interest rate of 13% and cash flows at the end of each period. Given annual compounding.

How much is the price of a perpetuity paying $1000 per year, if the discount rate...

How much is the price of a perpetuity paying $1000 per year, if the discount rate is 8.0% and its first payment is in 3 years?

b. Would an investment be worth more if it were an ordinary annuity or an annuity...

b. Would an investment be worth more if it were an ordinary annuity or an annuity due? Explain and illustrate with an appropriate example.

Define annuity due. Would an investment be worth more if it were an ordinary annuity or...

Define annuity due. Would an investment be worth more if it were an ordinary annuity or an annuity due? Explain.

1.)How much is this annuity worth today? It will payout $630 each quarter for 30 years....

1.)How much is this annuity worth today? It will payout $630 each quarter for 30 years. Your desired annual interest return is 4.8 %. (Don't forget to adjust the interest rate for quarterly, in addition to the time period.) $40,473.27 $39,954.22 $46,003.28 $46,486.44 $39,637.64 2.)Your savings contract will pay you $260 each month for the next 4 years . With a 7 percent nominal annual interest rate, what is this contract worth today? Adjust the interest rate and number of...

(Amount of an ordinary annuity) How much must you pay at the end of each year...

(Amount of an ordinary annuity) How much must you pay at the end of each year to repay a $50,000, 14% annual interest rate loan if you must make: Using excel a. 10 payments? b. 15 payments? c. 20 payments? d. 30 payments?

A deferred annuity is purchased with a lump sum amount of $308,273.17. Suppose money is worth...

A deferred annuity is purchased with a lump sum amount of $308,273.17. Suppose money is worth 5% compounded quarterly, and 13 years after the 5 year deferral period, the account is empty. Use this information to compute how much the annuity will pay per quarter after the deferral period.

Describe an ordinary annuity and an annuity due. Be clear on how they are the same...

Describe an ordinary annuity and an annuity due. Be clear on how they are the same and how they differ.

Do women tend to spend more time on housework than men? If so, how much more?

Question 1 (1 point) Do women tend to spend more time on housework than men? If so, how much more? A survey asked, "On average, how many hours a week do you personally spend on housework, not including childcare and leisure time activities?" The following are the responses (in hours) of 12 women and 15 men. Women: 16, 12, 10, 14, 15, 6, 11, 9, 12, 7, 12, 15 Men: 5, 3, 8, 11, 4, 3, 6, 2, 8, 12,...

Question