d) Semi-annual payments of 60,000 for 3 years that will start 5 years from now. e) Payments of 3,000 every 2 years for 10 years starting at the end of 6 years.
d) Semi-annual payments of 60,000 for 3 years that will start 5 years from now. e) Payments of 3,000 every 2 years for 10 years starting at the end of 6 years.
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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NOTE: answer only D and E
Transcribed Image Text:B. Directlons: Solve the following problems completely. Find the period of deferral in each of
the following deferred annuity.
a) Monthly payments of 2,000 for 5 years that will start 7 months from now.
a. Calculation of the period of deferral:
Period of deferral (K)= Time period after payment starts(t)–1
= 7-1
= 6
So, the period of deferral is 6 months.
b) Annual payments for 8,000 for 12 years that will start 5 years from now.
b. Calculation of period of deferral:
Period of deferral (K)= Time period after payment starts(t)–1
= 5-1
= 4
So, the period of deferral is 4 years.
c) Quarterly payments of 5,000 for 8 years that will start two years from now.
c. Calculation of period of deferral:
Period of deferral (K)= Number of Quarters x Time period after payment starts(t)–1
= 4 x 2 - 1
= 7
So, the period of deferral is 7 quarters.
d) Semi-annual payments of 60,000 for 3 years that will start 5 years from now.
e) Payments of 3,000 every 2 years for 10 years starting at the end of 6 years.
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