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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Determine the difference between the present value of a $10,000 twenty-year annuity earning 10% interest compounded annually versus a
$10,000 twenty-year growing annuity earning 10% interest compounded annually and having a 3% annuity growth rate."
Transcribed Image Text:11
Determine the difference between the present value of a $10,000 twenty-year annuity earning 10% interest compounded annually versus a
$10,000 twenty-year growing annuity earning 10% interest compounded annually and having a 3% annuity growth rate.

Transcribed Image Text:Multiple Choice
O
$19,069.09
$19,369.09
$19,669.09
$19,969.09
$20,269.09
G
Activati
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- Find the present value of the following annuities: 1. 100 at time 1 and increasing by 100 annually for 20 years if the effective rate is 8%. 2.500 at time 1, decreasing by 50 annually for 10 years if the effective rate is 8%.arrow_forwardAn investment is expected to result in equal payments of $25 at the end of each of the next 3 years (ordinary annuity). If the appropriate required rate of return (discount rate) is 5%, what is the present value of the annuity stream? (annual compounding) $68.08 $74.93 $21.60 O -$68.08arrow_forwardWhat is the present value of annual payments of $1,500 per year, at a discount rate of 10%, if the first regular annual annuity payment is received 3 years from today and continues for 15 years? Assume annual compounding.arrow_forward
- Find the future value of a 10-year annuity due with payments of $23,000 and an annually compounded interest rate of 4%. The future value is $. (Round to the nearest cent.)arrow_forwardFind the present value of an ordinary annuity which has payments of $1000 per year for 12 years at 6% compounded annually.arrow_forwardAn annual perpetuity has a constant cash flow of $1000. If the interest rate is 7% compounded annually, what is the present value of the perpetuity?arrow_forward
- Find the present value of a perpetuity starting at time 10 paying 100 annually if the interest rate is 12% compounded annually.arrow_forwardA 20-year annuity X has annual payments of $10,000 at the beginning of each year for 10 years, then annual payments of $20,000 at the beginning of each year for the next 10 years. A perpetuity Y has payments of Q at the end of each year for 10 years, then payments of 2Q at the end of each year thereafter. The present values of X and Y are equal when calculated using an annual effective interest rate of 5%. Find Q.arrow_forwardInvestment 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?arrow_forward
- Given the following information, calculate the rate of return. price = $501.88time to maturity = 10 yearsannual payment = $100type = ordinary annuityarrow_forwardWhat is the present value of an annuity of $6,000 to be received at the beginning of each of the next eight periods assuming an interest rate of 10%?arrow_forwardwhat;s the present value of perpetuity that pays % 1, 563 per year if the appropriate interest rate is 6.8% ?arrow_forward
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