A constant perpetuity with cash flow, C, will have the first cash flow occur exactly 17 years from now. Each subsequent cash flow will be exactly 7 years after the prior cash flow. You have used the formula, PV=C/r (correctly) to determine a value. The determined value needs to be discounted exactly how many years to get the PV today of the cash flows? The determined value needs to be discounted exactly years to get the PV today of the cash flows.
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- The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the end of every six months An annuity that pays $500 at the beginning of every six months An annuity that pays $1,000 at the end of each year. An annuity that pays $1,000 at the beginning of each year An ordinary annuity selling at $14,130.15 today promises to make equal payments at the end of each year for the next twelve years (N). If the annuity's appropriate interest rate (I) remains at 8.00% during this time, the annual annuity payment (PMT) will be You just won the lottery. Congratulations! The jackpot is $85,000,000, paid in twelve equal annual payments. The first payment on the lottery jackpot will be made today. In present value terms, you really won…The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the end of each year An annuity that pays $1,000 at the beginning of each year*** This is the correct option**** An annuity that pays $500 at the beginning of every six months A. An ordinary annuity selling at $2,514.15 today promises to make equal payments at the end of each year for the next eight years (N). If the annuity’s appropriate interest rate (I) remains at 8.00% during this time, the annual annuity payment (PMT) will be . B. You just won the lottery. Congratulations! The jackpot is $10,000,000, paid in eight equal annual payments. The…You are comparing two annuities. Annuity A pays $110 at the end of each year for 5 years. Annuity B pays $100 at the beginning of each year for 5 years. The rate of return on both annuities is 8 percent. Which one of the following statements is correct given this information? O Annuity B has both a higher present value and a higher future value than Annuity A. Annuity A has both a higher present value and a higher future value than Annuity B. O Annuity A has the same present value and future value as Annuity B.
- Calculate the present value at t=0 (now) of the following cash flows: D. $100 every 3 years forever, with the first payment at t=3 (t counts years), where the effective annual rate is .05 (i.e. 5%) E. $1000 every 3 years forever, with the first payment at t = 3 (t counts years), where the effective annual rate is .05 (i.e., 5%). F. $1000 every 3 years forever, with the first payment at t = 3 (t counts years), where the effective annual rate is .10 (i.e., 10%).The present value of an annuity is the amount needed now so that desired annuity payments may be made in the future. In this scenario annuity payments will be made at the beginning of each month. Thus, this is an annuity due. To find the present value of this annuity, the amount of money that should be deposited in an account now, the interest rate per period must first be found. The interest rate per period is calculated using the nominal, or annual, rate and the number of periods per year as follows. interest rate per period = nominal rate periods per year The rate was given to be 6%. Interest is compounded monthly, or 12 times per year. Find the interest rate per period. interest rate per period = nominal rate periods per year = % 12 = % The total number of compounding periods will be 1 less than the number of years annuity payments will be made multiplied by the number of compounding periods per year. There are 12…In order to fund your retirement, deposit of RM X can be made into an account today. This retirement plan wishes to pay RM100, in real terms, for 15 years, with first payment occurring 6 years from now. The inflation rate would be 0.0% for the next 5 years and 1.5% per annum thereafter. The annual effective rate of return is 6.8%. Calculate X. Please explain in details and state what formula did use on how to solve the problem
- Consider a stream of cash flows, where you receive $2,000.00 per year for 20 yearsEXCEPT year 12 during which you receive only $1,000.00. If the current market rate ofinterest is 7.200% (compounded annually), then what is the present value of this stream ofuneven cash flows? Hint: there are several ways to solve this problem but see if you cansolve it using a single annuity formula.Consider a future value of $3,000, 5 years in the future. Assume that the nominal interest rate is 9.00%. If you are calculating the present value of this cash flow under semiannual (twice per year) compounding, you would enter for N and for I/Y into your financial calculator. Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of approximately $ with semiannual compounding. If you are calculating the present value of this cash flow under quarterly (four times per year) compounding, you would enter for N and for I/Y into your financial calculator. Entering in the values you just calculated for N and I/Y, along with a PMT=0 and a FV=$3,000, into a financial calculator yields a present value of approximately $ with quarterly compounding. Suppose now that the cash flow of $3,000 only 1 year in the future. If you are calculating the present value of this cash flow under quarterly (12 times per…Which of the following will generate the greatest future sum of money, assuming other variables stay constant? Select one: a. 5% yearly compound interest b. 10% yearly simple interest c. 10% yearly compound interest d. 5% yearly simple interest
- If you invest $8,300 per period for the following number of periods, how much would you have received at the end? (Use a Financial calculator to arrive at the answers. Round the final answers to the nearest whole dollar.)a. 12 years at 6 percent.Future value$b. 20 years at 9 percent.Future value$c. 20 periods at 14 percent.Future value$Investment A will make N annual payments of $300.00 with the first of the N payments due immediately. Investment A has a value of $20000.00. Investment B is an ordinary annuity that will make (N minus 1) annual payments of $300.00 with the first payment due in one year from today. If investment A and investment B have the same expected return, then what is the value of investment B?Suppose you are going to receive $11,000 per year for 8 years. The appropriate interest rate is 11 percent per year. Requirement 1: What is the present value of the payments if they are in the form of an ordinary (a)annuity (cash flow starts at the end of the first compounding period)? (Click to select) (b) What is the present value if the payments are an annuity due (cash flow starts at the beginning of the first compounding period)? (Click to select) Requirement 2: (a)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an ordinary annuity? (Click to select) (b)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an annuity due? (Click to select)