On January 1, 1988, Felix inherited a perpetuitywith annual payments beginning in six months.The first payment was $5,000, and after that thepayments increased by 4% each year. Find thevalue of this perpetuity on January 1, 1995 if theannual effective interest rate was 7% from January1, 1988 through January 1, 1996 and 6%thereafter. (Round your answer to the nearest cent.) answer is $389486.63. please show work

Value of annuity depends on present value of cash flow from the annuity based on the time value of…

Answered: On January 1, 1988, Felix inherited a…

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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Similar questions

Derek deposited $700 at the end of every month into an RRSP for 7 years. The interest rate earned was 3.75% compounded semi-annually for the first 5 years and changed to 4.00% compounded monthly for the next 2 years. What was the accumulated value of the RRSP at the end of 7 years? Round to the nearest cent
Jim Wright invested $7500 twice a year in an annuity due at Pacific Securities Company for a period of 8 years at an interest rate of 4% compounded semiannually. Using the ordinary annuity table, calculate the total value of the annuity due at the end of the 8-year period.
Greg owes two debt payments – a payment of $5763 that was due in 10 months ago and a payment of $1916 due in 7 months. If Greg makes a payment now, what would this payment be if money is worth 7.12% compounded semi-annually? Assume a focal date of today.
Mr. Espinoza's debt of P160,000 is amortized by making equal payments at the end of every three months for six years with 4.3% interest rate compounded quarterly. How much is the quarterly payment? Construct an amortization schedule. How much will Mr. Espinoza pay after the term? Do you think that the total amount paid is fair given the total interest and the term of the annuity? Why or why not? Explain in your own words.
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Bill makes deposits of 2,700 at the end of each year for n years into a fund. At time n, he uses the accumulated value of the fund to purchase an annuity immediate that makes payments of 197,909.20 at the end of each year for 5 years. The annual effective interest rate is 15%. Calculate n. O a. 26 O b. 29 O c. 28 O d. 24 O e. 22
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Mr. Glen Secundo won a lottery paying P1,400,000 at the beginning of each year for 15 years. Find the amount must set aside today to satisfy this annuity at 13% compounded annually.
Juanita paid a life insurer $60,100 in exchange for an immediate life annuity. Juanita will receive $600 per month from the insurer, and her life expectancy is 14 years. Assume that Juanita receives 12 monthly payments in the first year. How much taxable income must she report? (Round your answer to 2 decimal places)
James plans to receive a monthly annuity of $779 for the next 25 years as part of his inheritance. The interest rate is 10.78 per annum compounded monthly Calculate the present value (PV) of this annuity. $72.26 O$779.00 $867.16 $289.05 O $1.11

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