1.Alice is an obsessive planner and she plans to buy a new laptop in 6 years (t = 6). The laptop costs $1,200 today (t = 0) but its price inflates at 4% per year. To finance this purchase, Alice deposits $200 each year during years t = 1,2,3, and then deposits $X during years t = 4, 5, 6. The annual effective interest rate is i = 10%. %3D Calculate X. 2.At an annual effective interest rate i%, i> 0, both of the following annuities have the same present value $X: (a) a 20-year annuity with annual payments of $55, (b) a 30-year annuity with annual payments of $30 per year for the first 10 years, $60 per year for the second 10 years, and $90 per year for the last 10 years. Find X
1.Alice is an obsessive planner and she plans to buy a new laptop in 6 years (t = 6). The laptop costs $1,200 today (t = 0) but its price inflates at 4% per year. To finance this purchase, Alice deposits $200 each year during years t = 1,2,3, and then deposits $X during years t = 4, 5, 6. The annual effective interest rate is i = 10%. %3D Calculate X. 2.At an annual effective interest rate i%, i> 0, both of the following annuities have the same present value $X: (a) a 20-year annuity with annual payments of $55, (b) a 30-year annuity with annual payments of $30 per year for the first 10 years, $60 per year for the second 10 years, and $90 per year for the last 10 years. Find X
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
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Transcribed Image Text:1.Alice is an obsessive planner and she plans to
buy a new laptop in 6 years (t = 6). The laptop
costs $1,200 today (t = 0) but its price inflates at
4% per year. To finance this purchase, Alice
deposits $200 each year during years t = 1,2,3,
and then deposits $X during years t = 4, 5, 6.
%3D
%3D
%3D
The annual effective interest rate is i = 10%.
Calculate X.
2.At an annual effective interest rate i%, i > 0,
both of the following annuities have the same
present value $X:
(a) a 20-year annuity with annual payments of
$55,
(b) a 30-year annuity with annual payments of
$30 per year for the first 10 years, $60 per year
for the second 10 years, and $90 per year for the
last 10 years. Find X
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