Suppose you are given a choice of the following two securities: (a) an annuity that pays $10,000 at the end of each of the next 6 years Or (b) a perpetuity that pays $10,000 forever, but the first cash payment is 11 years from today. Which security do you choose if the annual interest rate is 5%? (a) an annuity that pays $10,000 at the end of each of the next 6 years (b) a perpetuity that pays $10,000 forever, but the first cash payment is 11 years from today

Q: Assume that as of today, the annualized interest rate on a three-year security is 3 percent, while…

A: Interest rate on a three-year = 3% Interest rate on a  two-year  = 2.15%

Q: Suppose the government decides to issue a new savings bond that is guaranteed to double in value if…

A: Step1: Calculating the value of rate of return on the investment in the bond. We have,The…

Q: You decide to save $431 per month in equity securities, which you anticipate earning an interest…

A: An annuity refers to a series of periodic payments made in exchange for a lump sum payment. The…

Q: Assume that you contribute $150 per month to a retirement plan for 20 years. Then you can increase…

A: Future value refers to the value an investment or cash flow is expected to grow to at a specific…

Q: Suppose that if you purchase a US Treasury bond, it will pay you a one-time payment of $5000 in 10…

A: A Treasury Bond is a bond issued by the Government of USA. It carries no risk of default and are…

Q: Suppose the government decides to issue a new savings bond that is guaranteed to double in value if…

A: Present value of Annuity The future cash flow is discounted to determine the present value of an…

Q: An investor wants to save money to purchase real estate. He buys an annuity with quarterly payments…

A: Here, Quarterly Payment is $163 Interest Rate (r) is 5.5% Compounding Period (m) is Quarterly i.e 4…

Q: 1. A security pays you an annual amount of $900 for 10 years. The seller of the security requires…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: What is the present value of a security that promises to pay you $15,000 in 10 years?  Assume that…

A: The objective of this question is to calculate the present value of a future cash flow. In this…

Q: You are thinking about buying a savings bond. The bond costs $42 today and will mature in 13 years…

A: Principal amount invested now will become certain amount after certain period of time at specific…

Q: You are thinking about buying a savings bond. The bond costs $48 The bond will earn an annual rate…

A: Present Value = pv = $ 48Time = t = 12 YearsFuture Value = fv = $ 98

Q: If the interest rate is 15%, what is the present value of a security that pays you $1,100 next year,…

A: Time value of money is one of important concept being used in finance. As per this concept, a sum of…

Q: uppose you considering buying a 10-year bond. This bond will pay ou 1603 taka every year for the ext…

A: Price of bond will be the present value of future cash flow from the bond and that would be the…

Q: what is the payment every​ year

A: To calculate the payment at the end of each we will use below formulaAnnual payment = PV*rWherePV -…

Q: Consider a fixed-payment security that pays P100 at the end of every year fo the three years. If the…

A: Present value of bond can be calculated by using this equation Present value =C1/(1+r) +C2/(1+r)2…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: Interest Rate = r = 5%Initial Cost of Bond = ic = $3000

Q: If you had two investments to choose from, one a perpetuity that pays $100/year forever, or the…

A: Alternative 1: Perpetuity that pays $100/year forever Alternative 2: Bond that pays interest of…

Q: A man is offered two proposals to invest his money. The first offer is to invest $ 20,000 in the…

A: We need to calculate future value of both investments. Higher future value proposal will be chosen…

Q: You planned on having your personal trust fund by making uniform semi-annual end-of-period deposits…

A: Let the semiannual deposit = A n = 20 years = 40 semiannual periods r = 8% per annum = 4%…

Q: If a security currently worth $5,600 will be worth $12,379.82 seven years in the future, what is the…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: You purchased a bond at a price of $800. In 15 years when the bond matures, the bond will be worth…

A: A bond reveals the debt instrument that allows the issuer to raise funds from the public. The holder…

Q: Over the next three years, the expected path of 1-year interest rates is 1, 2,and 1 percent, and the…

A: Expected Path of the interest rate is 1, 2, 1 percent. Premia is 0, 0.2 and 0.5 for 1-year, 2-years…

Q: ppose in the question above, the tuition obligations have a Macaulay duration of 4.35 in years, and…

A: Duration of the bond shows the weighted period of the bond required to recover the all cash flow…

Q: What is the present value of a security that will pay $2,000 at the end of each year for 6 years if…

A: The present value can be calculated as follows if the payments are made at the end : Calculations…

Q: The annual payment of a 10-year fixed-income security is $50. The payments are made at the end of…

A: Present value of annuity is computed as follows:-PV= A*wherePV= Present value of annuityA= periodic…

Q: You would like to save up $13907 to travel in 9 years.  To do so, you will buy a savings bond that…

A: Bonds are an important financial instrument for both investors and issuers, providing a way to raise…

Q: My pension plan will pay me $11,500 once a year for a 10-year period. The first payment will come in…

A: Here,Annual amount received from pension plan is $11,500time period is 10 yearfirst payment starts…

Q: In 2020, your firm' s sales were $1,500,000, its net income was $400,000, and the dividend payment…

A: The dividends are the returns provided to the shareholders by the company. The dividend is the…

Q: You purchased a bond and will receive $500 every six months for the next five years. If the market…

A: Present value of annuity can be computed by using the following formula: Here,…

Q: Suppose that you trade a forward contract today that matures after one year. The forward price is…

A: Arbitrage is the strategy of taking advantage of price differences in different markets for the same…

Q: You are considering a savings bond that will pay $100 in 8 years. If the interest rate is 2.2%, what…

A: The objective of this question is to find out the present value of a savings bond that will pay $100…

Q: Suppose the government decides to issue a new savings bond that is guaranteed to double in value if…

A: Present value of annuity is the current value of the future payments that are calculated using the…

Q: The bond will earn an annual rate of %. (Round to two decimal places.)

A: An investment that simulates a debt commitment is called a bond. A government, municipality,…

Q: My pension plan will pay me $11,500 once a year for a 10-year period. The first payment will come in…

A: Here,AnnualAmount received from pension plan is $11,500Time Period is 10 yearFirst payment starts…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: To calculate the payment at the end of each we will use below formula   Annual payment = PV*r Where…

Q: Required: a. What is the duration of its obligation to me? The current interest rate is 10% per…

A: Bond valuation seeks to ascertain a bond's intrinsic worth. It entails determining the present value…

Q: A security pays you an annual amount of $900 for 10 years. the sellerof the security require the…

A: Annuity refers to series of equalized payments that are paid or received at start or ending of…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: Perpetual bonds do not have a principal payback requirement, in contrast to ordinary bonds, which…

Q: A 30-year security has a price of $19,759.12. The security pays $ 1,000 at the end of each of the…

A: The objective of the question is to find the annual cash flow amount between years 11 and 20 for a…