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

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
Asa has invested money from the settlement of an insurance claim. She plans to withdraw $14,080 from her savings account at the end of each year for five years. If the payments are deferred for four years and interest is 8% compounded quarterly, what was the amount of the insurance settlement? The insurance settlement was $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed)
Kevin won a lottery that will pay him $620000 at the end of each of the next twenty years. Assuming an appropriate interest rate is 9% compounded annually, what is the present value of this amount? $110627. $6169073. $5659701. $31719274.
For her daughter's university education, Carla Hackl has invested an inheritance in a fund paying 9.2% compounded quarterly. If ordinary annuity payments of $4750.00 per month are to be made out of the fund for 5 years and the annuity begins 7.75 years from now, how much was the inheritance
Don purchases a 20-year annuity-immediate evaluated at an annual effective rate of 5.5%. The first payment will be made at the end of year six in the amount of 2,000. The subsequent payments increase by 100 each year. Calculate the present value of the annuity at purchasing.
Susan won the lottery today which will pay an annual perpetuity of X, with the first payment occurring five years from today. The perpetuity has a present value of 100,000 based on an annual effective interest rate of 1% for the first ten years and 5% for all years thereafter. Calculate X. A. 4,100 B. 4,224 C. 4,357 D. 4,401 E. 5,696
Daniel purchases a perpetuity with varying annual payments made in arrears. During the first 5 years, the payments are constant and equal to 10 per year. Beginning in year 6, the payments start to increase. For year 6 and all subsequent years, the payment in that year is p% larger than the payment in the year immediately preceding that year, where p < 9.2. At an annual effective interest rate of 9.2%, the perpetuity has a present value of 167.50. Calculate p, to 2 decimal places.
John purchases an annuity due paying 6 % quarterly. If his payment is $ 250, the amount value will be in 2 years is Select one: $ 6000 $ 4000 $ 2139.83 $ 2000
Mr. De Castro wishes to have P1,400,000.00 when he retires 15 years from now. If he can expect to receive 4% annual interest, how much must he set aside in each of 15 equal annual beginning of year deposits.Mr. De Castro wishes to have P1,400,000.00 when he retires 15 years from now. If he can expect to receive 4% annual interest, how much must he set aside in each of 15 equal annual beginning of year deposits.
Joyce Keegan has decided to invest $500 quarterly for 5 years in an ordinary annuity at 12%. As her financial adviser, calculate the total cash value of the annuity at the end of year 5 for Joyce.

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