Consider the three 20-year annuities described below: (1) level payments of £1,000 payable annually in arrears (ii) increasing payments made annually in arrears, where the first payment is £1,000 and the payments increase by 10% pa compound each year thereafter (ii) continuous payments at the rate of £1,000 pa over the 20 years. Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.
Consider the three 20-year annuities described below: (1) level payments of £1,000 payable annually in arrears (ii) increasing payments made annually in arrears, where the first payment is £1,000 and the payments increase by 10% pa compound each year thereafter (ii) continuous payments at the rate of £1,000 pa over the 20 years. Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.
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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Transcribed Image Text:Consider the three 20-year annuities described below:
(1)
level payments of £1,000 payable annually in arrears
(i)
increasing payments made annually in arrears, where the first payment is £1,000 and the
payments increase by 10% pa compound each year thereafter
(iii)
continuous payments at the rate of £1,000 pa over the 20 years.
Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.
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