A local bank advertises the following deal: "Pay us $100 at the end of each year for 12 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever." a. Calculate the present value of your payments to the bank if the interest rate is 6.50%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value b. What is the present value of a $100 perpetuity deferred for 12 years if the interest rate is 6.50%? into calculations Round your answer to 2 decimal places.
A local bank advertises the following deal: "Pay us $100 at the end of each year for 12 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever." a. Calculate the present value of your payments to the bank if the interest rate is 6.50%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value b. What is the present value of a $100 perpetuity deferred for 12 years if the interest rate is 6.50%? into calculations Round your answer to 2 decimal places.
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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Problem 5-22 Perpetuities (LO3)
A local bank advertises the following deal: "Pay us $100 at the end of each year for 12 years and then we will pay you (or your
beneficiaries) $100 at the end of each year forever."
a. Calculate the present value of your payments to the bank if the interest rate is 6.50%.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Present value
b. What is the present value of a $100 perpetuity deferred for 12 years if the interest rate is 6.50%?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Present value
c. Is this a good deal?
No
Yes
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