1. You own a delayed perpetuity. It pays $200 per year, starting at the end of...

 

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1. You own a delayed perpetuity. It pays $200 per year, starting at the end of year five. If the annual interest rate is 4%, what is its current value to you? 2. You are renting some fields to a local farmer. He pays rent once a year after the crops are harvested and sold. At the end of this year, he will pay $5,000, but you agree that the will rent increase 3% each year. Assume the annual interest rate is 6%. What is the present value of the rent if you assume it is a perpetuity? 3. An insurance company offers a ten-year flat annuity with an annual interest rate of 3%. If the annual cash payments are $50 per year (starting at the end of year 1), what is the current price of the annuity? 4. An insurance company also offers a ten-year flat annuity due with an annual interest rate of 3%. (Annuity due means the first payment is today and not at the end of the year.) If the annual cash payments are $50 per year, what is the current price of the annuity due? 1. You own a delayed perpetuity. It pays $200 per year, starting at the end of year five. If the annual interest rate is 4%, what is its current value to you? 2. You are renting some fields to a local farmer. He pays rent once a year after the crops are harvested and sold. At the end of this year, he will pay $5,000, but you agree that the will rent increase 3% each year. Assume the annual interest rate is 6%. What is the present value of the rent if you assume it is a perpetuity? 3. An insurance company offers a ten-year flat annuity with an annual interest rate of 3%. If the annual cash payments are $50 per year (starting at the end of year 1), what is the current price of the annuity? 4. An insurance company also offers a ten-year flat annuity due with an annual interest rate of 3%. (Annuity due means the first payment is today and not at the end of the year.) If the annual cash payments are $50 per year, what is the current price of the annuity due?

Answer rating: 100% (QA)

Answer Present Value of a Delayed Perpetuity We can use the formula for the present value of a delay... View the full answer