Answered: (TRUE or FALSE?) The PV of the ordinary…

(TRUE or FALSE?) The PV of the ordinary annuity is larger than the PV of the annuity due because the cash flows of the annuity due are shifted forward one year and thus are discounted more.

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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(TRUE or FALSE?) The PV of the ordinary annuity is larger than the PV of the
annuity due because the cash flows of the annuity due are shifted forward one
year and thus are discounted more.

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5. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the beginning of every six months An annuity that pays $1,000 at the end of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year You bought an annuity selling at $2,867.74 today that promises to make equal payments at the beginning of each year for the next twelve years (N). If the annuity's appropriate interest rate (1) remains at 9.50% during this time, then the value of the annual annuity payment (PMT) is $375.00 You just won the lottery. Congratulations! The jackpot is $35,000,000, paid in twelve equal annual payments. The first payment on the…
Assume that at time 0 a sum L is lent for a series of n yearly payments. The rth payment, of amount xr, is due at the end of the rth year. Let the effective annual interest rate for the rth year be ir. Give an identity which expresses L in terms of the xr and ir.
Show that the present value of annuaity due is one period accumulated value of the present value of annuity immediate.
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The present value of a single sum is equal to the amount that, if invested today at the specified discount rate, would return the value of the single sum every year for a specified number of years. Select one: O True O False
Future value for an ordinary annuity and annuity due will be exactly the same if the investment horizon is exactly one year. Group of answer choices True False
An annuity in which the first cash flow occurs at the beginning of the period is called a/an: Oordinary perpetuity. growth annuity. Oordinary annuity. annuity due.
A complex annuity makes the following payments. However, the cash flow in Period 4 is missing. The total present value of all cash flows including the missing cash flow in Period 4 is $674.58. The appropriate discount rate / period is 10%. Find the missing cash flow. 0 1 100 2 100 3 100 4 ??? 5 100 6 100
Please answer this question: What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) What is the PV? What would be wrong with your answer to parts I(1) and I(2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, I sow /2=4%/2=2%, to solve the problems?
With a deferred ordinary annuity, the first payment was made one or more periods prior. the first payment begins one or more periods later. the last payment is made first. the first payment is made last.
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