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- g What is the future value of an ordinary annuity of S10 compounded at 10 percent? What would be the future value if it were an an- nuity due? h. You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end-of-year payments plus 10 percent compound interest on the unpaid balance. What will be the size of these payments? LWhat is the present value of a $1,000 perpetuity discounted back to the present at 8 percent? 000 per year for 7 yearsP=P1,000 r= 5% t= 10 years m=4 What would be the future value of the ordinary annuity of the given data?4) Suppose you will receive OMR 1 each year for the 3 coming year the Interest Rate is 10% Question: a. What is the Future Value of those payments?
- 4. The present value of a growing perpetuity, with cash flow C1 occurring one year from now, is given by: [C1/(r - g)], where r > g. True or False ? 5. An equal-payment home mortgage is an example of an annuity. True or False?What is the future value in 10 years of 1,500 payments received at the end of each year for the next 10 years? Assume an interest rate of 8%. * 25,260 23,470 21,730 18,395 O 15,000 What is the PV of an ordinary annuity with 10 payments of P2,700 if the appropriate interest rate is 5.5%? * P19,334 P18,367 P20,352 P16,576 O P17,449 You are given the option of receiving P1,000 now or an annuity of P85 per month for 12 months. Which of the following is correct? * You cannot choose between the two without computing future values. The choice you would make when comparing the future value of each would be the same as the choice you would make when comparing present values. You will always choose the lump sum payment. You will always choose the annuity. You cannot choose between the two without computing present values.What is the future value of a perpetuity paying 100 anually/? Assume 10% interest rate and cash flows at the end of each period?
- Q. # 1 : What is the future value of $1000 in 10 years if the interest is compounded at 6% annually ?A. What is the present value of a $500 perpetuity if the interest rate is 9%? Round your answer to the nearest cent. B. If interest rates doubled to 18%, what would its present value be? Round your answer to the nearest cent.2. You buy a perpetuity that starts its annual payment $100 in 5 years from now. The EAR is 5%. a. What is the present value of the perpetuity? b Now suppose that the annual payment grows at 3% per annum (all the other conditions are the same as above). What is the present value of this growing perpetuity?
- 7.4. Suppose that an annuity pays $10,000 per year for 10 years, with payments made continuously. We will compute the present value of this income stream, assuming an annual interest rate of year 7.4. Suppose that an annuity pays $10,000 per year for 10 years, with payments made continuously. We will compute the present value of this income stream, assuming an annual interest rate of 4% (r = 0.04/year). (a) Determine upper and lower bounds for the present value of the first year's payments. Bear in mind that a dollar paid immediately is worth $1, but a dollar paid at the end of the year is worth e" dollars. (b) Repeat part (a) for years 2 through 10. 7.6. Exercises 211 (c) Add up the pieces for years 1 through 10 to get upper and lower bounds for the present value of the entire annuity. (d) Average the upper and lower bounds from part (c) to get a good estimate for the present value of the annuity. This is (approximately) what an in- surance company would charge you for this annuity.4. Calculating Annuity Present Values An investment offers $6,125 per year for 15 years, with the first payment occurring one year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? LO 1 5. Calculating Annuity Cash Flows For each of the following annuities, calculate the annual cash flow. LO15. Consider an annuity where you receive $1,000 payments at the end of each year for the next 20 years. Assume the discount rate is 1.5%. What is the present value of this stream of income payments?