uppose you are given a choice of the following two securities: (a) an annuity that pays Php 500,000 at the end of each of the next 6 years; or (b) a perpetuity that pays 500,000 forever, but the first cash payment is 11 years from today. Which security do you choose if the annual interest rate is 5%

uppose you are given a choice of the following two securities: (a) an annuity that pays Php 500,000 at the end of each of the next 6 years; or (b) a perpetuity that pays 500,000 forever, but the first cash payment is 11 years from today. Which security do you choose if the annual interest rate is 5%

Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)

5th Edition

ISBN:9781305084766

Author:Saeed Moaveni

Publisher:Saeed Moaveni

Chapter20: Engineering Economics

Section20.4: Effective Interest Rate

Problem 3BYG

See similar textbooks

Similar questions

1. An engineer purchased a bond for ₱1M. This pays an interest of ₱50,000.00 each year for 20 years, thereafter on the maturity, will return the original investment. If there is a 2% annual inflation during this period, what rate of return will the engineer receive after considering the effect of inflation?
An investor makes a loan of $5000, to be repaid in one lump sum at the end of one year. What annual interest rate (%) corresponds to a lump-sum payment of $5425?
Compute the future value of a $1500 deposit, after eight years, in an account that pays a simple interest rate of 7%. How much interest will be paid to this account?
An employee is earning $ 18,000 a month and he can only afford to purchase a car which will require a down payment of $ 80,000 and a monthly amortization of 30% of his monthly salary. What would be the maximum cash value of a car he can purchase if the seller will agree to a down payment of $ 80,000 and the balance payable in four years at 12% per year payable in monthly basis. The first payment will be due at the beginning of the first month. Include cashflow diagram and formulas.
Mr.X makes a deposit of 10,000 OMR in an account at the end of every year. After 5 years he receives a raise and then makes deposit of 12,000 OMR every year. What is the balance in the amount after 8 years assuming an APR of 4% compounded yearly. Show the neat cash flow diagram.
A bank can lend a client Php 10,000.00 with a simple annual interest rate of 3% to be paid after 3 years. If the same principal amount and future worth are to be strictly transacted but using compounded interest annually to be paid after the same number of years, what should be the interest rate?
If you deposit $1000 per month into an investment account that pays interest at arate of 6% per year compounded quarterly, how much will be in your account atthe end of 5 years? Assume no interperiod compounding.
Lukas Center acquired a new Laser Machine worth ₱580,000.00. The center plans to pay 35% advance payment and the balance by quarterly payments for 7 years. Money is worth 9% converted quarterly. a. How much is the balance that must be amortized every three months? b. How many quarterly payments must be made to settle the obligation? c. Cost of the quarterly payments?
With formula and solution not excel A condominium unit can be bought at a down payment of ₱150,000 and a monthly payment of ₱ 23,347 for 10 years starting at the end of 5th year from the date of purchase. If money is worth 3% compounded monthly, what is the cash price of the condominium unit
A man wants to make 14\% nominal interest compounded semiannually on a bond investment. How much should the man be willing to pay now for a 12\% P10,000-bond that will mature in 10 years and pays interest semiannually? D. 8,509 C. 8,950 B. 8,590 A. 8,905 *in written solution please with regards to the choices
A corporation sold an issue of 20-year bonds, having a total face value of P10,000,000 for P9,500,000. The bonds bear interest at 16% payable semi annually. The company wishes to establish a sinking fund for retiring the bond issue and will make semi annual deposits that will earn 12%, compounded semi annually. Compute the annual cost for the interest and redemption of these bonds.
How many years will be required for a sum of money to double, if the annual interest rate is 10%, compounded quarterly? (correct answer: 5.66)