Answered: The amount in a fund one and a half…

The amount in a fund one and a half years from today is equal to 100. Find the present value of the fund using a nominal discount rate of 5% convertible semiannually.

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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The amount in a fund one and a half years from today is equal to 100. Find the present value of the fund using a nominal discount rate of 5% convertible semiannually.

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A company needs to set aside a fund to meet the following future annuity payments to an individual: £1443 paid at the end of each year for the first 4 years followed by £1441 paid at the end of each year up until year 15 (inclusive). Assuming an effective rate of interest of 6.9% pa throughout the entire period, how much total fund the company needs to hold today in order to meet these payments? Express your answer in £s to 2 decimal places. (correct answer = 13214.59)
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