Suppose you just bought an annuity with 12 annual payments of $15,700 at a discount rate of 11.75 percent per year. a. What is the value of the investment at the current interest rate of 11.75 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 6.75 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 16.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Present value at 11.75 percent $ 124,187.88 b. Present value at 6.75 percent $ 153,795.59 c. Present value at 16.75 percent $ 97,472.81
Suppose you just bought an annuity with 12 annual payments of $15,700 at a discount rate of 11.75 percent per year. a. What is the value of the investment at the current interest rate of 11.75 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 6.75 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 16.75 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Present value at 11.75 percent $ 124,187.88 b. Present value at 6.75 percent $ 153,795.59 c. Present value at 16.75 percent $ 97,472.81
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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Vijay
Transcribed Image Text:Suppose you just bought an annuity with 12 annual payments of $15,700 at a discount rate of 11.75 percent per year.
a. What is the value of the investment at the current interest rate of 11.75 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 6.75 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 16.75 percent?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
a. Present value at 11.75 percent
b. Present value at 6.75 percent
$
124,187.88
$
153,795.59
c. Present value at 16.75 percent
$
97,472.81
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