Consider the two different options to receive money: • Receive 150 at time 0, 225 at time n years, and 350 at time 2n years. • Receive 800 at time 15 years. If the annual effective interest rate is i, the present value of the two options is the same. If " 0.45, find i.
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- Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?If you invest $15,000 today, how much will you have in (for further instructions on future value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%
- The first option is the amount of $3000 in 4 years. The second option is to receive the amount of $1700 immediately followed by some unknown annuity that is paid at the end of each year for 4 years with the first annuity payment received at the end of year 1. Using an interest rate of 5.00%, determine the unknown annuity amount for the second option that would make the present value of both options equivalent.Which of the following statements is most correct? Group of answer choices The value of a perpetuity (say for $100 per year) will approach infinity as the interest rate used to evaluate the perpetuity approaches zero. If you are lending money, then, based on effective interest rates, you should prefer to lend at a 10 percent simple, or quoted, rate but with semiannual payments, rather than at a 10.1 percent simple rate with annual payments. However, as a borrower you should prefer the annual payment loan. The first payment under a 3-year, annual payment, amortized loan for $1,000 will include a smaller percentage (or fraction) of interest if the interest rate is 5 percent than if it is 10 percent. All of these.Which of the following options would you choose assuming an annual compound interest rate of 8%? A. Alternative 1: Receive $ 100 today. B. Alternative 2: Receive $ 120 in two years.
- Answer the two questions please 1- You are planning to withdraw $100 in Year 1, $150in Year 3, and $200 in Year 5. At a 5% interest rate, what is the present worth of these withdrawals? 2-If you plan to invest EOY 2 $4000, then what would this be equivalent to EOY 4 years? Assume i = 6%.If the five-year present value annuity factor is 3.60478 and the four-year present value annuity factor is 3.03735, what is the present value of the $1 received at the end of five years? Question 14 options: If the five-year present value annuity factor is 3.60478 and the four-year present value annuity factor is 3.03735, what is the present value of the $1 received at the end of five years? D) $1.2132 A) $0.63552 B) $1.76233 C) $0.56743You are offered the choice of two annuities. A: Receive $100 every year for the next ten years. The first payment starts one year from today. B: Receive $204 every two years for the next ten years. The first payment starts two years from today. Without calculating the present values of the annuities, explain how you can obtain the rate of interest per annum that would make you indifferent between the two annuities.
- Suppose the interest rate is 3.6% b. Having $650 in one year is equivalent to having what amount today? c. Which would you prefer, $650 today or $650 in one year? Does your answer depend on when you need the money? Why or why not? **round to the nearest cent**If interest rate is 10%, the present value of $100,000 to be received one year from now if $90,910.Which two statements are correct?a) The present value of receiving $25,000 at the end of each year for the next four years is lessthan $90,910b) The present value of receiving $25,000 at the end of each year for the next four years is morethan $90,910c) The present value of receiving $50,000 at the end of each year for the next two years is less than$90,910d) The present value of receiving $50,000 at the end of each year for the next three years is lessthan $90,910e) The present value of receiving $50,000 at the end of each year for the next two years is morethan $90,910According to the concepts underlying the present-value formula, would you prefer to receive (a) P75 one year from now, (b) P85 two years from now, or (c) P90 three years from now, if the relevant market interest rate is 10% and will remain at 10% for the next three years? a. The present values of all three choices are identical b. P75 one year from now c. P85 two years from now d. P90 three years from now