A one-year annuity that pays $100 semi-annually will starts its payment in 6 months from now. APR is 8 percent compounded semi-annually. a. What is the present value of the annuity? b. What is the effective annual rate? c. Now consider another one-year annuity that makes a “single” payment in a year from now. How much should it pay to the investor if it is equally valuable to the previous annuity?
A one-year annuity that pays $100 semi-annually will starts its payment in 6 months from now. APR is 8 percent compounded semi-annually. a. What is the present value of the annuity? b. What is the effective annual rate? c. Now consider another one-year annuity that makes a “single” payment in a year from now. How much should it pay to the investor if it is equally valuable to the previous annuity?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 12MC: (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest...
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A one-year annuity that pays $100 semi-annually will starts its payment in 6 months from now. APR is 8 percent compounded semi-annually.
a. What is the present value of the annuity?
b. What is the effective annual rate?
c. Now consider another one-year annuity that makes a “single” payment in a year from now.
How much should it pay to the investor if it is equally valuable to the previous annuity?
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