Question

# 5. Using a discount rate of 4.8% APR, compounded monthly, calculate the present value of a...

5. Using a discount rate of 4.8% APR, compounded monthly, calculate the present value of a monthly perpetuity pay‐ ment of \$5250 if: (a) the first payment is made one month from now (2 pts.), (b) the first payment is made today (2 pts.), and (c) the first payment is made 30 months from now (2 pts.).

(a) THE FIRST PAYMENT IS MADE ONE MONTH FROM NOW

PRESENT VALUE OF PERPETUAL PAYMENTS = PERPETUAL PAYMENT/(RATE/12)

PRESENT VALUE OF PERPETUAL PAYMENTS = 5250/(0.048/12) = \$1312500

(b) THE FIRST PAYMENT TODAY

PRESENT VALUE OF PERPETUAL PAYMENTS FROM TODAY= PERPETUAL PAYMENT/( RATE/12) (1 +RATE/12)

PRESENT VALUE OF PERPETUAL PAYMENTS = [5250/(0.048/12)]*(1+0.048/12) = \$1317750

(c) THE FIRST PAYMENT IS MADE 30 MONTHS FROM NOW

PRESENT VALUE OF PERPETUAL PAYMENTS =

[PERPETUAL PAYMENT/( RATE/12)] [1/(1 +RATE/12)30 ]

PRESENT VALUE OF PERPETUAL PAYMENTS = [5250/(0.048/12)]*[1/(1+0.048/12)30]= \$1164318.75

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Need Online Homework Help?

Most questions answered within 1 hours.

##### Active Questions
• The college Physical Education Department offered an Advanced First Aid course last summer. The scores on...
• Researchers hypothesized that increasing a woman's level of arousal would increase her perceptions of attractiveness of...
• Equation 37-14b in the textbook gives the energy emitted by Hydrogen when electrons transition between states...
• Theory of Computation Please provide explanation too on how it works a. Give an NFA recognizing...
• Question 1 A sequential pattern detection circuit (state machine) has input A and output Y, which...
• Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden...