Question

A perpetuity will make $1000 payments at the end of each year starting from year 5 (i.e., first payment will occur at the end of year 5). If the discount rate is 7%, what is the present value of this perpetuity? Round your answer to the nearest dollar; do not include the $ sign (i.e., if the answer is $8,300.3562, enter it as 8,300).

Answer #1

Answer - 10,186

Calculation :-

Step 1 - Calculate the value of Perpetuity :-

value of Perpetuity = Perpetuity / Rate

value of Perpetuity = 1000 / 0.07

value of Perpetuity = 14286

Step 2 - Calculate the Present value of Perpetuity :-

Since first payment will occur at the end of year 5 (i.e. N=5), Hence we will Pull value of Perpetuity 5 years back :-

Present value of Perpetuity = (Value of Perpetuity / 1 + Discount Rate)N

Present value of Perpetuity = (14286 / 1.07)5

Present value of Perpetuity = 10,186

Calculus is needed.
Perpetuity X has level payments of $220 at the end of
each year. Perpetuity Y also has end-of-year payments but
they begin at $11 and increase by $11 each year. Find the rate of
interest which will make the difference in present values between
these two perpetuities a maximum. (Round your answer to two decimal
places.)

A perpetuity will make annual payments with the first payment
coming 9 years from now. The first payment is for $4700, and each
payment that follows is $150 dollars more than the previous one. If
the effective rate of interest is 6.2%, what is the present value
of the perpetuity?
Answer = $

A perpetuity with payments of 1 at the end of each year has a
present value of 40. A 10-year annuity pays X at the beginning of
each year. Assuming the same effective interest rate, the present
values of the perpetuity and the 10-year annuity are equal. Find
X.

John Smith will receive annual payments of $800 at the end of
each year for 12 years. The first payment will be received in year
4. What is the present value of these payments if the discount rate
is 7 percent?

Payments of $1200 at the end of each month for the next 5
year(s) are equivalent to a single payment of $X now (t=0). If
interest is 14.1% p.a. compounding monthly, then $X is (to the
nearest cent, do not show dollar sign or commas eg $2,185.6323 is
shown 2185.63) :

(1 pt) A perpetuity will make annual payments, with the first
payment coming 9 years from now. The first payment is for 4700
dollars and each payment that follows is 120 dollars more than the
one before. If the effective rate of interest is 5.2 percent, what
is the present value?
Answer = dollars.

What is the present value of the following series of cash
payments: $8,000 per year for four consecutive years starting one
year from today, followed by annual cash payments that increase by
2% per year in perpetuity (i.e. cash payment in year 5 is
$8,000*1.02, cash payment in year 6 is $8,000*1.022, etc.)? Assume
the appropriate discount rate is 5%/year. ( PLZ USE EXCEL TO ANSWER
IT)

A perpetuity will make payments of $100,000 every third year,
with the first payment occurring three years from now. The annual
nominal interest rate convertible quarterly is 8%. Find the present
value of this perpetuity.
(I did this problem, just want to check if I did it correctly
because the answer doesn't look right to me, not sure what I did
incorrectly, I got PV = 372,800.47)

Q4
9.You are borrowing $200,000 for an amortized loan with terms
that include annual payments,9 year loan, and interest rate of 4.5
per year. How much of the first year's payment would be applied
toward reducing the principal? Answer to the nearest cent xxx.xx,
and do not enter the dollar sign.
10.What is the effective or equivalent annual rate if the bank
pays 7 % nominal interest rate but compounds the money daily (use
365 days in a year)? Answer...

A perpetuity pays $1000 at the end of every month for 11 months
of each year. At the end of the 12th month of each year, it pays
double that amount. If the effective ANNUAL rate is 10.4%, what is
the present value of this perpetual annuity?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 35 minutes ago

asked 40 minutes ago

asked 54 minutes ago

asked 55 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago