(a)Calculate the present value of an annuityof £1000 paid at the endof each year for 15 yearswith an interest rate of 2.5% per annum equivalent. (b)How much more needs to be added to the fund to make this an annuity duewith the same value (c)The annuity is to be paid continuouslyat the rate of £1000 per annum. What is the present value now?
(a)Calculate the present value of an annuityof £1000 paid at the endof each year for 15 yearswith an interest rate of 2.5% per annum equivalent. (b)How much more needs to be added to the fund to make this an annuity duewith the same value (c)The annuity is to be paid continuouslyat the rate of £1000 per annum. What is the present value now?
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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Question
(a)Calculate the
(b)How much more needs to be added to the fund to make this an
(c)The annuity is to be paid continuouslyat the rate of £1000 per annum. What is the present value now?
Expert Solution
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(a) to (c):
Calculation of PV of Annuity, PV of Annuity Due and PV of Annuity Compounded Continuously:
Excel Spreadsheet:
Excel Workings:
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