Suppose you have an opportunity to buy an annuity that pays $1,000 at the end of each year for 5 years, at a 6% interest rate. What is the most you should pay for the annuity?
Financila Management
1. PV of an ordinary
Suppose you have an opportunity to buy an annuity that pays $1,000 at the end of each year for 5 years, at a 6% interest rate. What is the most you should pay for the annuity?
2. FV of an ordinary annuity
Suppose Sandra opens a bank account with 20 000 at the beginning of the year at an interest rate of 8%. If the first deposit is made today and then 3 additional payments, how much would be accumulated after 5 years?
3. FV of an ordinary annuity due
An annuity makes 20 annual payments of $3,000 with the first payment coming today. What is the
4. PV of a perpetuity
What’s the present value of a perpetuity that pays $1500 per year if the appropriate interest rate is 15%?
5. PV of an uneven cash flow stream
At a rate of 5%, what is the present value of the following cash flow stream? $0 at Time 0; $250 at the end of Year 1; $600 at the end of Year 2; $0 at the end of Year 3; and $700 at the end of Year 4?
Step by step
Solved in 2 steps
