Question 7 Mike has retired and has invested in the following annuity scheme: Investment: $250,000 Duration: 20 years Interest compounded monthly Monthly payment from the scheme: $1,791.08 If he has invested the same amount of money in a perpetuity scheme, that pays the same rate of interest per annum, compounded monthly, the monthly payment would be

Question 7 Mike has retired and has invested in the following annuity scheme: Investment: $250,000 Duration: 20 years Interest compounded monthly Monthly payment from the scheme: $1,791.08 If he has invested the same amount of money in a perpetuity scheme, that pays the same rate of interest per annum, compounded monthly, the monthly payment would be

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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You would like to have enough money saved to receive a $90,000 per year perpetuity after retirement. The annual interest rate is 8 percent. Required: How much would you need to have saved in your retirement fund to achieve this goal? a) Assume that the perpetuity payments start on the day of your retirement. b) Assume that the perpetuity payments start one year from the date of your retirement.
Annuity Due 1. Find the amount and the present value of an annuity due of P950 every quarter for f years and 6 months, if money in wurth 5% compounded quarterly. 2. Philip wants to have P10,200 for his traveling expenses four years from now. How much munt he save at the beginning of each quarter starting now, if he gets 6% compounded quarterly interest on his savings? 3. A sala set is bought for P2.500 down payment and P750 payable at the beginning of each month for 36 months. What is the equivalent cash price of the set. If the interest rate is 4% compounded monthly?
A man can sell his business for $800,000 cash or for $125,000 plus $12'I a. Find the present value of the annuity that is offered if money is worth 10%; compounded annually. b. If he takes the $800,000, spends $125,000 of it, and invests the rest in a 9-year annuity at 10%, compounded annually, what size annuity payment will he receive at the end of each year? c. Which is better, taking the $125,000 and the annuity or taking the cash settlement? a. Find the present value of the annuity that is offered if money is worth 10%, compounded annually. (Type an integer or decimal rounded to the nearest cent as needed.)
How much more is a perpetuity of $6,000 worth than an annuity of the same amount for 10 years? Assume an interest rate of 9% and cash flows at the end of each year. a. $99,212 b. $34,740 c. $58,097 d. $28,161
Brodie receives $500 every 12 months forever, starting 20 months from today. If his stated annual interest rate is 14% compounded monthly, what is the present value of this perpetuity? a. $3,600 b. $3,000 c. $3,250 d. $3,350 e. $3,050
Question 1 What is the amount of the payments that Dwight Schrute must make at the end of each of 8 years to accumulate a fund of $86,200 by the end of the 8th year, if the fund earns 8% interest, compounded annually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Dwight's payment at the end of each year must be ?
Ira Roth opens up a Roth IRA and places $4,500 in his retirement account at the beginning of each year for 20 years. He believes the account will earn 8 percent interest per year, compounded quarterly. How much will he have in his retirement account in 20 years?
Part B Troy begins saving for his retirement at age 30. He deposits an annual sum of $25,000 each year until the age of 60. The money earns a rate of interest of 5.25%. Required: Calculate the value of his investment at age 60.
BURGE no-N-NI 3.4.3 A person establishes a sinking fund for retirement by contributing $7,500 per year at the end of each year for 20 years. The person then withdraws equal yearly payments for the next 20 years leaving the account with a zero balance. If the account pays 9% compounded annually, what yearly payment will the person receive during the last 20 years?
QUESTION SIX a) Find the Future Value of an annuity for$1000 paid at the end of each year for 3 years assuming interest is compounded annually at 7%? b) Julie Miller will receive the set of cash flows below. What is the Present Value at a discount rate of 10%. Year one 500, year two 500, year three 300, year four 300 and year five 150. c) Perpetuity has no time limit. The present value of $100 perpetuity discounted at 15% is?
Problem #4: A perpetuity pays $3400 at the end of every month for 11 months of each year. At the end of the 12th month of each year, it pays double that amount. If the effective ANNUAL rate is 10.7%, what is the present value of this perpetual annuity?
What is the present value of an ordinary annuity that pays $1,000 per year for 4 years, assuming the annual discount rate is 7 percent? a. $3,051.58 b. $762.90 c. $3,624.32 d. $3,738.32 e. $3,387.21

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