An investment is expected to result in equal payments of $3160.00 at the end of each of the next 5 years. (ordinary annuity) If the appropriate rate of return (discount rate) is 10%, what is the present value of the annuity stream? (annual compounding) What is the present value of a security that will pay $11250 in 18 years if securitiesof equal risk pay 5% annually?(Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00) Find the present value of $500.00 due in 10 years at 8%.(Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00)

The question is based on the application of the time value of money for annuity payments. Annuity…

An investment is expected to result in equal payments of $3160.00 at the end of each of the next 5 years. (ordinary annuity) If the appropriate rate of return (discount rate) is 10%, what is the present value of the annuity stream? (annual compounding)

An investment is expected to result in equal payments of $3160.00 at the end of each of the next 5 years. (ordinary annuity) If the appropriate rate of return (discount rate) is 10%, what is the present value of the annuity stream? (annual compounding)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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Question

An investment is expected to result in equal payments of $3160.00 at the end of each of the next 5 years. (ordinary annuity)

If the appropriate rate of return (discount rate) is 10%, what is the present value of the annuity stream? (annual compounding)

What is the present value of a security that will pay $11250 in 18 years if securities
of equal risk pay 5% annually?
(Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00)

Find the present value of $500.00 due in 10 years at 8%.
(Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00)

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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