A corporate pension plan has to makethe following payments over the nextfew years:Year1 2 3 4Amount ($ million) 29 33 39 47NO CHAT GPT, HAND WRITTEN ONLY OTHERWISE WILLLEAVE A DOWNVOTEThe appropriate interest rate is 8%.What is the present value of theliability (in $ million)?What is the duration of the liability?

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Answered: A corporate pension plan has to make…

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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7. What's the future value of a 7%, 5-year ordinary annuity that pays $600 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations. Round your answers to the nearest cent. Future Value of an Ordinary Annuity: $ Future Value of an Annuity Due: $
For life insurance policies, some of the premium pays for the cost of the insurance, and the remainder goes toward the cash value of the policy and earns interest like a savings account. Consider the following insurance company options. Company 1: pays 4.2% compounded monthly on the cash value of their policies Company 2: pays 4.21% compounded semiannually on the cash value of their policies What is the APY offered by each company? (Round your answers to the nearest hundredth.) Company 1 % Company 2 %
Use the following 8% interest factors to answer the question below: Future Value of Ordinary Annuity. 8.92280 10.63663 12.48756 What amount should be recorded as the cost of a machine purchased December 31, 2023, which is to be financed by making 8 annual payments of $10,000? Each payment is made at the end of the period. The applicable interest rate is 8%. Present Value of Ordinary Annuity. 5.2064 5.7466 6.2469 7 periods 8 periods 9 periods hs
An insurance company offers you an end-of-year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9 percent. What should you be willing to pay today for this annuity? a. $408,672 b. $438,192 c. $398,144 d. $429,600
An annuity pays $54 per year for 28 years. What is the future value (FV) of this annuity at the end of those 28 years, given that the discount rate is 8%? A. $5,148.30 B. $7,207.62 C. $6,177.96 D. $3,088.98
My pension plan will pay me $10,500 once a year for a 10-year period. The first payment will come in exactly five years. The pension fund wants to immunize its position. Required: a. What is the duration of its obligation to me? The current interest rate is 5.0% per year. b. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond? c. What will be the face value of the holdings in each zero? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the duration of its obligation to me? The current interest rate is 5% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Duration years
1. The present value of an annuity of P5,000 to be received at the end of each of the next six months for 6 years at a 4% annual rate would be? a. P3,950 b. P26,210 c. P52,875 d. None of the above 2. What is the value of P 100 perpetuity if interest is 7%? a. P 1,429 b. P12,321 c. P 21,350 d. None of the above
You deposit $9500 per quartely for 1 years at i, = 8.31 %. This fund then provides for a perpetuity of $6100 per year, with the first payment made n month after the final deposit. At the time of the first perpetuity payment, interest rates fall to i, = 2.37 %. Find n. %3D Answer: 30.36
Find the expected net profit of an insurance company on a life-insurance policy whose death benefit is $1,000,000 if the annual premium for the policy is $2000 and the chance of the customer dying within the next year is 0.002. Interpret. (show work)
v.1
How much will be the future value of a 5-year ordinary annuity which has annual payments of $200, evaluated at a 7.5% semi-annual interest rate? a. $3,828.34 b. $287.13 c. $1,161.68 d. $1,348.48
Find the discounted value of an ordinary simple perpetuity paying $2100 at the end of half-year, if interest is i365 = 19.97 %. Answer: 21031.55

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