PRESENT VALUE OF A PERPETUITY What is the present value of a $300 perpetuity if
ID: 2820561 • Letter: P
Question
PRESENT VALUE OF A PERPETUITY
What is the present value of a $300 perpetuity if the interest rate is 9%? Round your answer to the nearest cent.
$
If interest rates doubled to 18%, what would its present value be? Round your answer to the nearest cent.
$
What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $1,250?
e. $77.19
EFFECTIVE RATE OF INTEREST
Find the interest rates earned on each of the following. Round each answer to two decimal places.
You borrow $750 and promise to pay back $780 at the end of 1 year.
%
You lend $750 and the borrower promises to pay you $780 at the end of 1 year.
%
You borrow $60,000 and promise to pay back $116,924 at the end of 7 years.
%
You borrow $8,000 and promise to make payments of $2,219.30 at the end of each year for 5 years.
%
FUTURE VALUE: ANNUITY VERSUS ANNUITY DUE
What's the future value of a 3%, 5-year ordinary annuity that pays $200 each year? Round your answer to the nearest cent.
$
If this was an annuity due, what would its future value be? Round your answer to the nearest cent.
$
TIME TO REACH A FINANCIAL GOAL
You have $56,930.69 in a brokerage account, and you plan to deposit an additional $3,000 at the end of every future year until your account totals $260,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal? Round your answer to two decimal places at the end of the calculations.
years
f you would like to accumulate $7,500 over the next 5 years, how much must you deposit each six months, starting six months from now, given a 6% interest rate and semiannual compounding?
a. $81.25 b. $94.06 c. $85.31 d. $89.58e. $77.19
EFFECTIVE RATE OF INTEREST
Find the interest rates earned on each of the following. Round each answer to two decimal places.
You borrow $750 and promise to pay back $780 at the end of 1 year.
%
You lend $750 and the borrower promises to pay you $780 at the end of 1 year.
%
You borrow $60,000 and promise to pay back $116,924 at the end of 7 years.
%
You borrow $8,000 and promise to make payments of $2,219.30 at the end of each year for 5 years.
%
FUTURE VALUE: ANNUITY VERSUS ANNUITY DUE
What's the future value of a 3%, 5-year ordinary annuity that pays $200 each year? Round your answer to the nearest cent.
$
If this was an annuity due, what would its future value be? Round your answer to the nearest cent.
$
TIME TO REACH A FINANCIAL GOAL
You have $56,930.69 in a brokerage account, and you plan to deposit an additional $3,000 at the end of every future year until your account totals $260,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal? Round your answer to two decimal places at the end of the calculations.
years
f you would like to accumulate $7,500 over the next 5 years, how much must you deposit each six months, starting six months from now, given a 6% interest rate and semiannual compounding?
a. $ 879.23 b. $ 654.23 c. $1,330.47 d. $ 569.00 e. $ 732.67Explanation / Answer
1. Present value of perpertuity = 300/0.09 = 3,333.33
2. present value of perpetuity = 300/0.18 = 1,666.67
3. annual payment = 0.065 * 1250 = 81.25
4. a. rate of interest paid= 780/750 - 1 = 4.00% (-4.00% can be considered the rate earned)
max of 4 subsections to be answered
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