What is an annuity?* a*An investment that has no definite end and a stream of cash payments that continues forever b.A stream of cash flows that start one year from today and continue while growing by a constant growth rate c A series of equal payments at equal time periods and guaranteed for a fixed number of years d.A series of unequal payments at equal time periods which are guaranteed for a fixed number of years

What is an annuity?* a*An investment that has no definite end and a stream of cash payments that continues forever b.A stream of cash flows that start one year from today and continue while growing by a constant growth rate c A series of equal payments at equal time periods and guaranteed for a fixed number of years d.A series of unequal payments at equal time periods which are guaranteed for a fixed number of years

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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In the present value of an annuity due table, the factors ________. Group of answer choices decrease as the interest rates increase, given a set number of periods decrease as the periods increase, given a set interest rate increase as the periods decrease, given a set interest rate increase as the interest rates increase, given a set number of periods
3.12 Suppose the spot rates of interest for investment horizons of 1 to 5 years are 4%, and for 6 to 10 years are 5%. (c) Compute the future value of the annuity-immediate at the end of year 10, assuming future payments earn the forward rates of interest, using equation (3.18).
An even stream of payments over equal time periods where the interest rate is constant is referred to as a(n): a) Post-annuity. Ob) Annuity. c) Pre-annuity. d) Accumulated Annuity due.
For question 1 parts a,b,c below, show all work that justifies your results. You will show how to use series to compare values of payments over time with a lump sum payment today. The value of future payments in terms of today's dollars is known as the present value of those payments. 1. a. What is the present value formula if annual payments of C dollars continue indefinitely, assuming an average annual interest rate r? Write the answer as a series using summation notation b. Rewrite the summation formula found in part a. as a geometric series, and then find the sum. The answer will be a fraction containing C and r. c. For annuities with a present value of $1 million, calculate the annual payouts given over 25 years assuming interest rates of 1%, 5%, and 10%. Use the formula you obtained in part b. There are three answers- one for each rate, measured in dollars. Round each answer to the nearest cent.
ou can assume that all payments are made at the beginning of the period and use "1" for the "type" argument in the formula. A. Suppose you invest $ 11,400 today. What is the future value of the investment in 29 years, if interest at 7% is compounded annually? B B. Suppose you invest $ 11,400 today. What is the future value of the investment in 29 years, if interest at 7% is compounded quarterly? 4 5 6 27 28 29 C. Suppose you invest St $ 570 monthly. What is the future value of the investment in 29 years, if interest at 5% is compounded monthly? Question 1 Question 2 + Ready Accessibility: Investigate MAR 17 A W +
An annuity due is an annuity for which: Question 10 options: A) the payments are made to repay a loan B) the payments are made at the beginning of each payment period C) the payments continue forever D) the payments are made at the end of each payment period E) the payment period is not the same as the conversion period
What is the future value?
Example 2.14: Calculating the present value of an annuity due at 12% An investor wants to buy an annuity of R100 for the next three years, each instalment being paid at the beginning of the year. If a bank is prepared to pay interest at 12%, how much must be invested today? It can be seen that the amount will be invested and the first instalment will immediately be repaid. It can be illustrated as shown in Table 2.6. value of an annuity due at 12%
What is the future value (at the end of 10 years) of an annuity that pays $700 a quarter over 10 years with the payments invested at 6.6% per annum (assume compounding matches payment periods, common assumption for such problems)? (enter your answer in the following format 123456.78) Answer:
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)"
You are explaining how a variable annuity functions to one of your clients. Which of the following statements is true? A) Withdrawals are always federal income tax-free. B) Growth inside the annuity is taxed annually. C) The growth in the variable annuity is guaranteed. D) The rates of return may fluctuate depending on how the account value is invested.
the discount rate or the interest rate increases for a given time period? As the discount rate or the interest rate decreases? 10. Relationship between an ordinary annuity and an annuity due. Compare the present value of a $6,000 ordinary annuity at 10 percent interest for ten years with the present value of a $6,000 annuity due at 10 percent interest for eleven years. Explain the difference.

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