Suppose you just bought an annuity with 10 annual payments of $16,500 at a discount rate of 13.75 percent per year. a. What is the value of the investment at the current interest rate of 13.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What happens to the value of your investment if interest rates suddenly drop to 8.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. What happens to the value of your investment if interest rates suddenly rise to 18.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Suppose you just bought an annuity with 10 annual payments of $16,500 at a discount rate of 13.75 percent per year. a. What is the value of the investment at the current interest rate of 13.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What happens to the value of your investment if interest rates suddenly drop to 8.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. What happens to the value of your investment if interest rates suddenly rise to 18.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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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Bha
Which of the following statement is most correct? When solving a problem involving an annuity dueyou must select the END model on your financial calculator When using a financial calculatorcash outflows generally have to be entered as negative numbers because a financial calculator sees money leaving your hands The present value of a single future sum of money is POSITIVELY related to both the number of years until payment is received and the discount rate In the loan amortization tablethe payment is constant, the interest payment is increasing and the principals are declining.
ind the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent. $800 per year for 10 years at 12%. $ $400 per year for 5 years at 6%. $ $800 per year for 5 years at 0%. $ Now rework parts a, b, and c assuming that payments are made…
What is the present value of $1,300 due in 14 years at a 7 percent interest rate and 12 percent interest rate? Do not round intermediate calculations. Round your answers to the nearest cent. Present value at 7%: $ Present value at 12%: $ Explain why the present value is lower when the interest rate is higher. I. The less interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future. II. The more interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future. III. The more interest you can earn during an investment period, the more you need to invest today to receive a particular amount in the future. -Select- v
Suppose that you want to take out a loan and that your local bank wants to charge you an annual real interest rate equal to 3%. Assuming that the annualized expected rate of inflation over the life of the loan is 1%, determine the nominal interest rate that the bank will charge you. What was the actual real interest rate on the loan if, over the life of the loan, actual inflation is 0.5%?
I got the first part but am stuck on part b. Could you explain what I must do? What is the present value of a 3-year annuity of $250 if the discount rate is 6%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ 668.25 b. What is the present value of the annuity in (a) if you have to wait 2 years instead of 1 year for the first payment? (Round your intermediate and final answers to 2 decimal places.)
Please solve very soon completely
can someone help me please
Question # 3: Suppose that your retirement benefits during your first year of retirement are $50000. Assume that this amount is just enough to meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of 5% due to inflation. Suppose you do not expect to receive any cost-of-living adjustment in your retirement pension. Then some of your future cost of living has to come from savings other than retirement pension. If your savings account earns 7% interest a year, how much should you set aside in order to meet this future increase in the cost of living over 25 years?
One can solve for payments (PMT), periods (N), and interest rates (1) for annuities. The easiest way to solve for these variables is with a financial calculator or a spreadsheet. Quantitative Problem 1: You plan to deposit $2,100 per year for 4 years into a money market account with an annual return of 3%. You plan to make your first deposit one year from today. a. What amount will be in your account at the end of 4 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ b. Assume that your deposits will begin today. What amount will be in your account after 4 years? Do not round intermediate calculations. Round your answer to the nearest cent. $ Quantitative Problem 2: You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $95,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement account will earn 12% annually. a.…
If you put up $38,000 today in exchange for a 6.75 percent, 14-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.)
B2) Perpetuity in the financial system is a situation where a stream of cash flow payments continues indefinitely or is an annuity that has no end. The UK's government bond known as a Consol is one example of a perpetuity. How much money, Ap, should you invest at the present in such a bond if you would like to receive perpetual monthly payments in the amount of R = $1200, assuming the monthly interest rate is i = 0.25%. You may assume the first payment is due in 1 month. Hint: if you draw a timeline, you will get the following infinite series: R R R Ap + + 1 + i (1 + i)² ' (1 + i)³ (1 + i)"

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