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Consider the three 20-year annuities described below: (1) level payments of £1,000 payable annually in arrears (ii) increasing payments made annually in arrears, where the first payment is £1,000 and the payments increase by 10% pa compound each year thereafter (ii) continuous payments at the rate of £1,000 pa over the 20 years. Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.

Consider the three 20-year annuities described below: (1) level payments of £1,000 payable annually in arrears (ii) increasing payments made annually in arrears, where the first payment is £1,000 and the payments increase by 10% pa compound each year thereafter (ii) continuous payments at the rate of £1,000 pa over the 20 years. Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter4: Time Value Of Money
Section4.17: Amortized Loans
Problem 1ST
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Consider the three 20-year annuities described below: (1) level payments of £1,000 payable annually in arrears (i) increasing payments made annually in arrears, where the first payment is £1,000 and the payments increase by 10% pa compound each year thereafter (iii) continuous payments at the rate of £1,000 pa over the 20 years. Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.
Transcribed Image Text:Consider the three 20-year annuities described below: (1) level payments of £1,000 payable annually in arrears (i) increasing payments made annually in arrears, where the first payment is £1,000 and the payments increase by 10% pa compound each year thereafter (iii) continuous payments at the rate of £1,000 pa over the 20 years. Calculate the discounted mean term of each annuity using an interest rate of 10% pa effective.
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