(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $2,000 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 15%? What if the appropriate discount rate is 13%?
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- (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $5,500 at the end of year one and the annual cash flows grow at a rate of 3% per year indefinitely, if the appropriate discount rate is 11%? What if the appropriate discount rate is 9%? a. If the appropriate discount rate is 11%, the present value of the growing perpetuity is $ (Round to the nearest cent.) b. If the appropriate discount rate is 9%, the present value of the growing perpetuity is $ (Round to the nearest cent.) Next abc IMG P Type here to search F6 F7 F5 Esc F3 F4 F1 F2 %23 124 % 2 3 W R Tab F G S CapsLk(Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $3,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 15%? What if the appropriate discount rate is 13%?
- What is the present value of a perpetuity stream of cash flows that pays P1,000 at the end of year one, and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 8%?Please answer this question: What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) What is the PV? What would be wrong with your answer to parts I(1) and I(2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, I sow /2=4%/2=2%, to solve the problems?Suppose you are going to receive $11,000 per year for 8 years. The appropriate interest rate is 11 percent per year. Requirement 1: What is the present value of the payments if they are in the form of an ordinary (a)annuity (cash flow starts at the end of the first compounding period)? (Click to select) (b) What is the present value if the payments are an annuity due (cash flow starts at the beginning of the first compounding period)? (Click to select) Requirement 2: (a)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an ordinary annuity? (Click to select) (b)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an annuity due? (Click to select)
- This problem demonstrates the dependence of an annuity's future value on the size of the periodic payment. Suppose a fixed amount will be invested at the end of each year and that the invested funds will earn 5.3% compounded annually. What will be the future value of the investments after 15 years if the periodic investment is: (Do not round intermediate calculations and round your final answers to 2 decimal places.) Investment Future Value a. $2,300 per year $ b. S3, 300 per year $ c. S4, 300 per year $Consider a stream of cash flows, where you receive $2,000.00 per year for 20 yearsEXCEPT year 12 during which you receive only $1,000.00. If the current market rate ofinterest is 7.200% (compounded annually), then what is the present value of this stream ofuneven cash flows? Hint: there are several ways to solve this problem but see if you cansolve it using a single annuity formula.Simple Annuity Solve the following problems. Show a complete and detailed solution. What is asked? What are given? Formula to be used and a detailed solution. Write legibly and neatly. 1. What is the present worth of a P1000 annuity starting at the end of the third year and continuing to the end of the fourth year, if the annual interest rate is 15%? 2. Find the annual payment to extinguish a debt P15,000 payable for 6 years at 12% interest annually. 3. A factory operator bought a diesel generator set for P 20,000.00 and agreed to pay the dealer uniform sum at the end of each year for 5 years at 8.5% interest compounded annually, that the final payment will cancel the debt for principal and interest. What is the annual payment? 4. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay the 90% balance on monthly installment for 60 months at an interest rate of 10% compounded monthly. Compute the amount of the monthly payment. 5. What is the accumulated amount of…
- What is the present value of a perpetual stream of cash flows that pays $ 7,500 at the end of year one and the annual cash flows grow at a rate of 2% per year indefinitely, if the appropriate discount rate is 9%? What if the appropriate discount rate is 7%? Question content area bottom Part 1 a. If the appropriate discount rate is 9%, the present value of the growing perpetuity is $ enter your response here . (Round to the nearest cent.)Time for a lump sum to double: If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money? Future value -- annuity versus annuity due: What is the future value of a 7%, 5 year ordinary annuity that pays $300 each year? If this were an annuity due, what would its future value be? Present and future values of a cash flow stream: An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 8% annually, what is its present value? Its future value? Loan amortization and EAR: You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What would be the monthly loan payment? What would be the loan’s EAR? Present value of a perpetuity: What s the present value of a $100…If you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Annual cash flow
