unit 6-4 (Present value of a perpetuity) At a discount rate of 6.00%, find the present value of a perpetual payment of $5,500 per year. If the discount rate were lowered to 3.00%, half theinitial rate, what would be the value of the perpetuity?a. If the discount rate were 6.00%, the present value of the perpetuity is $b. If the discount rate were lowered to 3.00%, half the initial rate, the present value of the perpetuity is $(Round to the nearest cent.)(Round to the nearest cent.)

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Answered: (Present value of a perpetuity) At a…

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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(Present value of a perpetuity) At a discount rate of 13.00%, find the present value of a perpetual payment of $1,500 per year. If the discount rate were lowered to 6.50%, half the initial rate, what would be the value of the perpetuity? a. If the discount rate were 13.00%, the present value of the perpetuity is $ (Round to the nearest cent.) b. If the discount rate were lowered to 6.50%, half the initial rate, the present value of the perpetuity is $ (Round to the nearest cent.)
(Present value of a perpetuity) At a discount rate of 6.50%, find the present value of a perpetual payment of $2,000 per year. If the discount rate were lowered to 3.25%, half the initial rate, what would be the value of the perpetuity?a. If the discount rate were 6.50%, the present value of the perpetuity is $]. (Round to the nearest cent.)
A perpetuity of $1 each year, with the first payment due immediately, has a present value of $25 at an annual effective rate of i%. The owner exchanges it for another perpetuity with the first payment due immediately and subsequent payments due at two year intervals. What should the payment of the second perpetuity be, in order to keep the same interest rate, i%, and the same present value? A B с D E Less than $1.90 At least $1.90, but less than $1.94 At least $1.94, but less than $1.98 At least $1.98, but less than $2.02 $2.02 or more
At a discount rate of 6.00%, find the present value of a perpetual payment of $ 1,000 per year. If the discount rate were lowered to 3.00%, half the initial rate, what would be the value of the perpetuity? Question content area bottom Part 1 a. If the discount rate were 6.00%, the present value of the perpetuity is $ enter your response here . (Round to the nearest cent.)
Find the future value of an ordinary annuity if payments are made in the amount R and interest is compounded as given. Then determine how much of this value is from contributions and how much is from interest. R=16,000; 4.3% interest compounded quarterly for 11 years. The future value of the ordinary annuity is $__ (Round to the nearest cent as needed.) The amount from contributions is $__ and the amount from interest is $__. (Round to the nearest cent as needed.)
(Present value of an annuity due) Determine the present value of an annuity due of $5,000 per year for 8 years discounted back to the present at an annual rate of 14 percent. What would be the present value of this annuity due if it were discounted at an annual rate of 19 percent? a. If the annual discount rate is 14 percent, the present value of the annuity due is $ (Round to the nearest cent.)
Find the future value of an annuity due with an annual payment of $14,000 for three years at 4% annual interest using the simple interest formula. How much was invested? How much interest was earned? What is the future value of the annuity? $ (Round to the nearest cent as needed.) How much was invested? S How much interest was earned? S (Round to the nearest cent as needed.) ←
K (Present value of an annuity due) Determine the present value of an annuity due of $2,000 per year for 25 years discounted back to the present at an annual rate of 6 percent. What would be the present value of this annuity due if it were discounted at an annual rate of 11 percent? CELE (Round to the nearest cent.) $(Round to the nearest cent.) a. If the annual discount rate is 6 percent, the present value of the annuity due is $ b. If the annual discount rate is 11 percent, the present value of the annuity due is:
Find the future value of each annuity due. Then determine how much of this value is from contributions and how much is from interest. Payments of $1000 made at the beginning of each semiannual period for 7 years at 8.49 % compounded semiannually The future value of the annuity due is $. (Do not round until the final answer. Then round to the nearest cent as needed.) The amount from contributions is $ The amount from interest is $ (Do not round until the final answer. Then round to the nearest cent as needed.)
d. Calculate the future sum of $1,000, given that it will be held in the bank for 5 years earning an APR of 10 percent compounded semiannually. e What is an annuity due? How does this differ from an ordinary annuity? f. What is the present value of an ordinary annuity of $1,000 per year for 7 years discounted back to the present at 10 percent? What would be the present value if it were an annuity due?
What is the present value of a perpetuity that pays $3,800 per year if the appropriate interest rate is 5%?
Determine the present value of a $3,500 perpetuity if the interest rate is 7%. If interest rates were to double to 14%, calculate the present value.

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