a) In order to create an endowment, which pays Rs 500,000 per year, forever, how much money must be set aside today in the rate of interest is 10%? If the first payment of Rs 500,000 will be received after 3 years, what will be present value of such cash payment? b) Which deal is better, 8.4% compounded annually or 8.6% compounded quarterly or 8.7% compounded monthly? c) What is real interest rate if Rs. 500,000 is invest at 10% per annum for 5 years and inflation rate is 7%?

Q: What is the present value of the payments if they are in the form of an ordinary annuity? What is…

A: The present value can be calculated as follows : Calculations for above :

Q: buy a house for Rs50 lakh and immediately make cash payment of Rs 10 lakh. You finance the balance…

A: amount of loan taken=50-10=40interest rate =12%time period=20 years or 240 months

Q: How much should be invested now (to the nearest $) to receive $24,000 per annum in perpetuity if the…

A: We have the following information: Annuity: $24,000 Rate of Interest: 5%

Q: 3) equal deposits. The first deposit is made right now, the second, one year from now, and the…

A: Given data; amount needed to be accumulated = $ 25,000 Number of year= 3 interest rate = 5% deposits…

Q: If you put 45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash…

A: Present Value = 45,000 Rate = 6.4% Time period = 15 ye

Q: a. What is the amount of the annuity purchase required if you wish to receive a fixed payment of…

A: In this we have to calculate present value FACTOR of annuity and from that we can  calculate the…

Q: In order to create an endowment, which pays Rs 500,000 per year, forever, how much money must be set…

A: Formula to calculate the present value is: PV = FV/(1+i)^n Where PV is the present value, FV is the…

Q: If you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual…

A: Annual cash flows are the regular payments or cash receipts received or paid out on an annual basis…

Q: Suppose you are going to receive $5,000 per year for 8 years. The appropriate interest rate is 10…

A: PMT = $5000r =0.10n=8PV of ordinary annuity=?PV of annuity due=?

Q: What is the present value of an annual annuity payment of Php7,000 made for 12 years with a required…

A: Present value of annuity due is computing the value at the end of the number of periods given using…

Q: Your company wants to create a scholarship program that will cost $17,000 dollars a year. They will…

A: To calculate the investment amount required today we will use the below formula   Investment amount…

Q: A fund is to be created which pays out a scholarship of £7,000 every year in perpetuity. The first…

A: Perpetuity are funds that are paid over the whole life period of annuities. Value of perpetuity is…

Q: If you put up $38,000 today in exchange for a 6.75 percent, 14-year annuity, what will the annual…

A: Solution- We know that  PV=PMT[(1-(1+r)^-n)/r] Where PMT= Periodic payment r= rate n= number of…

Q: If you put up $51,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual…

A: Solution- We know that  PV = PMT [(1-(1+r)^-n)/r] Where PMT= Periodic payment r= rate n= number of…

Q: If you put up $37,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual…

A: Time value of money states that the worth of money in present is always more than that of future…

Q: Say that you want to establish a scholarship fund that will make fixed payments forever. To fund the…

A: This is case of future value of annuity due. In annuity due equal periodic payments are made at the…

Q: If you put up $73,000 today in exchange for an annual 6.75 percent, 18-year annuity, what will the…

A: The annual cash flow can be computed with the help of present value of annuity.

Q: Suppose you would like to have P25,000 saved 6 years from now to pay towards your down payment on a…

A: Future value of ordinary annuity(payments at end of year) concept is used to calculated the annual…

Q: 1. Today, the maximum amount of money that Ramesh is willing to pay for a certain perpetuity is…

A: Future value is the compounded value of future cassh flows at a specified rate of interest. Future…

Q: you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash…

A: Given information: According to the question,  the present value is $45,000 Rate of interest : 6.4%…

Q: A person is preparing for his retirement and placed 50,000 Php in a time deposit with 6.5% interest…

A: Value of investment 50,000 Time of investment Now Annual Interest Rate 6.50% Compounding…

Q: Consider a perpetuity that pays £500 per year with its first payment at the beginning of t=5. What…

A: So an investment will be made at the beginning of year 5, and the person will get $500 per year…

Q: If you put up $41,000 today in exchange for a 5.1 percent, 15-year annuity, what will the annual…

A: Given,Exchange rate (rate) = 5.1%Time Period (nper) = 15 Years (Annuity)Initial Outflow (pv) =…

Q: Suppose you are going to invest $11,000 per year for six years. The appropriate interest rate is 9…

A: Annuity refers to a series of regular payments being made for a defined period. When the payments…

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.