Question

Given an interest rate of 10.0 percent per year, what is the
value at date *t* = 7 of a perpetual stream of $900 payments
with the first payment at date *t* = 16?

Answer #1

The question is solved by first computing the present value of perpetual cash stream.

Present value= Annual payment/ Interest rate

= $900/0.10

= $9,000.

The value at date t=7 is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 9,000

N= 9

I/Y= 10

Press the CPT key and PV to compute the present value.

The value obtained is 3,816.88.

Therefore, the value at t=7 of a perpetual cash stream is
**$3,816.88.**

In case of any query, kindly comment on the solution

Given an interest rate of 6.5 percent per year, what
is the value at year 10 of a perpetual stream of $3500 payments
that begin at year 20?

Given an interest rate of 12% per year compounded monthly, what
is the value at the date t = 0 of a growing perpetual stream of
$200 monthly payments that begin at the date t = 1 (1st
month) and grows at 0.05% per month till perpetuity? (nearest
integer value)
Select one:
a. $20000
b. $2857
c. $21053
d. -$5000

What is the value today of $1,400 per year, at a discount rate
of 8 percent, if the first payment is received 7 years from now and
the last payment is received 29 years from today?

What is the value today of $1,800 per year, at a discount rate
of 9 percent, if the first payment is received 7 years from now and
the last payment is received 30 years from today?

What is the value today of $1,300 per year, at a discount rate
of 11 percent, if the first payment is received 7 years from now
and the last payment is received 26 years from today?

What is the present value of $1,500 per year, at a discount rate
of 6 percent, if the first payment is received 7 years from now and
the last payment is received 32 years from now?

What is the value today of $3,000 per year, at a discount rate
of 8 percent, if the first payment is received 7 years from today
and the last payment is received 25 years from today? (Do not round
intermediate calculations and round your final answer to 2 decimal
places, e.g., 32.16.) Please show formula and BAII solution if
possible.

What is the present value of $2,625 per year, at a discount rate
of 6.9 percent, if the first payment is received six years from now
and the last payment is received 20 years from now?

What is the present value of $4,100 per year at a discount rate
of 9 percent if the first payment is received 5 years from now and
the last payment is received 15 years from now?

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the last payment is received 15 years from now?

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