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1 year ago

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You purchase an annuity due for $1,200. The annuity has 11 annual payments of 100 and a larger payment at the beginning of year

12. The effective annual interest rate is 3.50%. What is the present value at the end of the 8th year of the remaining payments?

1 answer:

romanna [79]1 year ago

8 0

Answer:

Give me brainliest pls! I neeed it to rank up jus pls do it!

Explanation:

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Gerome is the human resource manager at his company. He is systematically studying positions to determine their various elements

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A 10-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.5% (2.75% of face value every six months). The repor

Sveta_85 [38]

Answer:

YTM 5.2% present value: $1,023.1644

YTM 1% present value: $1,427.2169

YTM 8% present value: $830.1209

YTM 8% present value: $515.7617

Explanation:

YTM we will calculate the present value of the coupon payment

andthe maturity at each YTM rate given:

The coupon payment present value will be the present value of an ordinary annuity

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

Coupon payment 28 (1,000 x 2.75%)

time 20 (10 years x 2 payment per year)

rate 0.026 (YTM over 2 as the payment are semiannually)

$27.5 \times \frac{1-(1+0.026)^{-20} }{0.026} = PV\\$

PV $424.6800

The present value of the maturity will be the present value of a lump sum:

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 1,000.00

time 20.00

rate 0.026

$\frac{1000}{(1 + 0.026)^{20} } = PV$

PV 598.48

PV c $424.6800

PV m $598.4843

Total $1,023.1644

Now, we will calculate changin the YTM the concept and formulas are the same, just the rate is diffrent:

<u>If YTM = 1% </u>

$27.5 \times \frac{1-(1+0.005)^{-20} }{0.005} = PV\\$

$\frac{1000}{(1 + 0.005)^{20} } = PV$

PV c $522.1540

PV m $905.0629

Total $1,427.2169

<u>If YTM = 8%</u>

$27.5 \times \frac{1-(1+0.04)^{-20} }{0.04} = PV\\$

$\frac{1000}{(1 + 0.04)^{20} } = PV$

PV c $373.7340

PV m $456.3869

Total $830.1209

<u>If YTM = 15%</u>

$27.5 \times \frac{1-(1+0.075)^{-20} }{0.075} = PV\\$

$\frac{1000}{(1 + 0.075)^{20} } = PV$

PV c $280.3485

PV m $235.4131

Total $515.7617

3 0

1 year ago

A company’s stock is currently selling for 28.50. Its next dividend, payable one year from now, is expected to be 0.50 per share

melisa1 [442]

Answer: $22.22

Explanation:

We can use the dividend discount model to solve for this.

The formula is,

P = D1 / r - g

Where,

D1 = the next dividend

r = the expected return

g = the growth rate.

We do not have the expected return but we can calculate for it using the old stock price and growth rate. Making it x we have,

28.5 = 0.5 / x - 0.075

28.5 (x - 0.075) = 0.5

x = 0.5 / 28.5 + 0.075

x = 0.09254385964

x = 9.25 %

Now that we have the expected return we can calculate the new stock price with the new growth rate,

P = 0.5 / 9.25% - 7%

P = 22.2222222222

P = $22.22

The new stock price is $22.22

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