19. Norma receives $400,000 from a life insurance policy with which she purchases an annuity-certain. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
19. Norma receives $400,000 from a life insurance policy with which she purchases an annuity-certain. The annuity will pay 12 equal annual installments, with the first payment made immediately. On the day she receives payment number 6 she is offered, in lieu of the future annual payments, a new payment scheme: (i) 8 annual payments of $20,000, beginning in one year, followed by a monthly perpetuity of X. (ii) The first monthly perpetuity payment would occur one month after the last annual payment of $20,000. The effective annual rate of interest is 10% for the entire time period. Determine the value of X. [Hint: rearrange cash flow to form different annuities, also starting at different times] 19. Norma receives $400,000 from a life insurance policy with which she purchases an annuity-certain. The annuity will pay 12 equal annual installments, with the first payment made immediately. On the day she receives payment number 6 she is offered, in lieu of the future annual payments, a new payment scheme: (i) 8 annual payments of $20,000, beginning in one year, followed by a monthly perpetuity of X. (ii) The first monthly perpetuity payment would occur one month after the last annual payment of $20,000. The effective annual rate of interest is 10% for the entire time period. Determine the value of X. [Hint: rearrange cash flow to form different annuities, also starting at different times]
Expert Answer:
Related Book For
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
Posted Date:
Students also viewed these finance questions
-
1. Hannah is applying for a life policy on her girlfriend Sarahs life. The policy is $500,000 and carries a large premium. Hannah is the main earner, so she is concerned about not being able to pay...
-
Today is January 1, 2022. Archie and Elaine Peyton have come to you, a financial planner, for help in developing a plan to accomplish their financial goals. From your initial meeting together, you...
-
With only a straightedge and compass, use a number line and the Pythagorean theorem to construct a segment whose length is 2. Measure the segment as accurately as possible, and write your answer in...
-
The charter of Vista West Corporation specifies that it is authorized to issue 300,000 shares of common stock. Since the company was incorporated, it has sold a total of 160,000 shares (at $16 per...
-
Let {X, Y, Z, IV) be an independent set in Rn. Which of the following sets is independent? Support your answer. (a) {X - Y, Y-Z,Z-X] (b) {X + Y, Y+Z,Z + X) (c) {X - Y, Y-Z, Z- W, W - X) (d) {X + Y,...
-
In the following contingency table, the row and column totals are presented, but the data for one row and one column have been omitted. Thus, there are data for only r 1 rows and c 1 columns. Show...
-
Reveille, Inc., purchased Machine #204 on April 1, 2010, and placed the machine into production on April 3, 2010. The following information is relevant to Machine #204: Price...
-
1. Consider a six-month American put option to sell one million units of a foreign currency. The current exchange rate is 0.79 and the strike price is 0.80 (both expressed as dollars per unit of the...
-
Repeat Example 9.2, but with a feed pressure of 5.0 MPa. Compare your results to those obtained at a feed pressure of 1.0 \(\mathrm{MPa}\). Data From Example 9.2:- Air can be separated into...
-
1. [10 points] The simplest scheme for integrating a one-dimensional function is the "trapezoid rule". As you will recall, a one-dimensional integral is just the area under a curve. To estimate the...
-
The Koch Snowflake. A snowflake-like shape is recursively defined as follows. Start with an equilateral triangle: Next, increase the size by a factor of three and replace each straight line with four...
-
Consider the following problem description: Customers order products from a store. Invoices are generated to list the items and quantities ordered, payments received, and amounts still due. Products...
-
In the object-oriented design of an airline passenger reservation program, suppose that airplane has been identified as one object and airplane seat has been identified as another object. Focusing...
-
Repeat Exercise 21, using the values at \(75 \%\) relative humidity. Data From Exercise 21: Refer to the data set pit.csv. Consider depths of pits at all durations at 40% 40 % relative humidity. The...
-
The queue is implemented as a class containing an array of items, a data member indicating the index of the last item put on the queue (rear), a data member indicating the index of the location...
-
General Green Productions Ltd has an authorized share of 1,125,000 $1 ordinary shares. On December 31, 2015, the following Trial Balance was extracted from the companys books: Trial Balance...
-
(a) Given a mean free path = 0.4 nm and a mean speed vav = 1.17 105 m/s for the current flow in copper at a temperature of 300 K, calculate the classical value for the resistivity of copper. (b)...
-
A firm has a capital structure containing 40% debt, 20% preferred stock, and 40% common stock equity. The firms debt has a yield to maturity of 8.1%, its preferred stocks annual dividend is $3.10,...
-
How is the residual theory of dividends used to explain observed dividend payments? How is this theory in conflict with evidence suggesting that corporate managers smooth dividends?
-
Define a corporate stakeholder. Which groups are considered stakeholders ? Would shareholders also be considered stakeholders ? Compare, in terms of economic systems, the principle of maximizing...
-
The total monthly sick leave time of employees of a small company has a normal distribution with mean 100 hours and standard deviation 20 hours. (1) What is the probability that the total monthly...
-
The random variable \(X\) has a Weibull distribution with mean value 12 and variance 9 . (1) Calculate the parameters \(\beta\) and \(\theta\) of this distribution. (2) Determine the conditional...
-
If sand from gravel pit 1 is used, then molten glass for producing armored glass has a random impurity content \(X\) which is \(N(60,16)\)-distributed. But if sand from gravel pit 2 is used, then...
Study smarter with the SolutionInn App