1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and discuss the three possibilities of settling the last payment: (a) at the time of the last regular payment Outstanding AMT paid @ t=9 $ 297.26 (b) two years after the last regular payment Outstanding AMT paid @ t= 10 $ 315.37 (c) at the fractional time equal to the term of the annuity Outstanding AMT paid @ t= 9.10 Using compound interest (2.46) $ 299.07 2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever. Assuming the interest rate is 6% per annum, when can the first scholarship be offered? Scholarship can be offered in 20 years and 8 months. 3. [3] Calculate (a) (la) 710.05 (b) (Is)710.05 ANS: $22.02, $30.98
1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and discuss the three possibilities of settling the last payment: (a) at the time of the last regular payment Outstanding AMT paid @ t=9 $ 297.26 (b) two years after the last regular payment Outstanding AMT paid @ t= 10 $ 315.37 (c) at the fractional time equal to the term of the annuity Outstanding AMT paid @ t= 9.10 Using compound interest (2.46) $ 299.07 2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever. Assuming the interest rate is 6% per annum, when can the first scholarship be offered? Scholarship can be offered in 20 years and 8 months. 3. [3] Calculate (a) (la) 710.05 (b) (Is)710.05 ANS: $22.02, $30.98
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective
rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and
discuss the three possibilities of settling the last payment:
(a) at the time of the last regular payment
Outstanding AMT paid @ t=9 $
297.26
(b) two years after the last regular payment
Outstanding AMT paid @ t= 10 $
315.37
(c) at the fractional time equal to the term of the annuity
Outstanding AMT paid @ t= 9.10
Using compound interest (2.46)
$
299.07
2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever.
Assuming the interest rate is 6% per annum, when can the first scholarship be offered?
Scholarship can be offered in 20 years and 8 months.
3. [3] Calculate
(a) (la) 710.05
(b) (Is)710.05
ANS: $22.02, $30.98](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbfb3da1d-5a95-42cd-817d-725702d6886d%2F1782108d-2d46-439b-8406-9cde7b038b6e%2F9d8pnbl_processed.png&w=3840&q=75)
Transcribed Image Text:1. [3] A principal of $20,500 generates income of $3,000 at the end of every 2 years at an effective
rate of interest of 3% per annum for as long as possible. Calculate the term of the annuity and
discuss the three possibilities of settling the last payment:
(a) at the time of the last regular payment
Outstanding AMT paid @ t=9 $
297.26
(b) two years after the last regular payment
Outstanding AMT paid @ t= 10 $
315.37
(c) at the fractional time equal to the term of the annuity
Outstanding AMT paid @ t= 9.10
Using compound interest (2.46)
$
299.07
2. [4] An endowment of $5,000 is to generate a $1,000 scholarship every academic year forever.
Assuming the interest rate is 6% per annum, when can the first scholarship be offered?
Scholarship can be offered in 20 years and 8 months.
3. [3] Calculate
(a) (la) 710.05
(b) (Is)710.05
ANS: $22.02, $30.98
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education