For specific values of interest rate, express in percentage rounded off to 2 decimal places, e.g. 12.34%; while monetary values must be written in accounting format (rounded to the nearest centavos) with cur- rency symbol when indicated, e.g. P 1, 234, 567.89. For time durations that are not exact whole numbers, round off to 2 decimals, e.g. 1.43. (1) (a) An annuity immediate has semiannual payments of P 10,000 for 10 years at a rate of 6% convert- ible quarterly. Find its present value. (b) An annuity immediate has quarterly payments of P5,000 for 6 years at a rate of 4% convertible semiannually. Find its present value. (2) An cashflow has a first payment of P 1,000 and increases by P 100 each period until payments reach P1,500. All payments are credited at the end of each period. There are 10 further payments of P 1,500. Find the present value at 6.5% effective per period. Hint: Write this as a sum of an increasing annuity and a deferred annuity but be cautious that first payment P is not equal to the periodic increase Q in payment.
For specific values of interest rate, express in percentage rounded off to 2 decimal places, e.g. 12.34%; while monetary values must be written in accounting format (rounded to the nearest centavos) with cur- rency symbol when indicated, e.g. P 1, 234, 567.89. For time durations that are not exact whole numbers, round off to 2 decimals, e.g. 1.43. (1) (a) An annuity immediate has semiannual payments of P 10,000 for 10 years at a rate of 6% convert- ible quarterly. Find its present value. (b) An annuity immediate has quarterly payments of P5,000 for 6 years at a rate of 4% convertible semiannually. Find its present value. (2) An cashflow has a first payment of P 1,000 and increases by P 100 each period until payments reach P1,500. All payments are credited at the end of each period. There are 10 further payments of P 1,500. Find the present value at 6.5% effective per period. Hint: Write this as a sum of an increasing annuity and a deferred annuity but be cautious that first payment P is not equal to the periodic increase Q in payment.
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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Answer no. 1 only
Transcribed Image Text:For specific values of interest rate, express in percentage rounded off to 2 decimal places, e.g. 12.34%;
while monetary values must be written in accounting format (rounded to the nearest centavos) with cur-
rency symbol when indicated, e.g. P 1, 234, 567.89. For time durations that are not exact whole numbers,
round off to 2 decimals, e.g. 1.43.
(1) (a) An annuity immediate has semiannual payments of P 10,000 for 10 years at a rate of 6% convert-
ible quarterly. Find its present value.
(b) An annuity immediate has quarterly payments of P5,000 for 6 years at a rate of 4% convertible
semiannually. Find its present value.
(2) An cashflow has a first payment of P 1,000 and increases by P 100 each period until payments reach
P 1,500. All payments are credited at the end of each period. There are 10 further payments of P 1,500.
Find the present value at 6.5% effective per period. Hint: Write this as a sum of an increasing annuity
and a deferred annuity but be cautious that first payment P is not equal to the periodic increase Q in
payment.
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