Mrs. Williams finds that she has two options for investing $31,000.03 for fifteen years. The first...
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Mrs. Williams finds that she has two options for investing $31,000.03 for fifteen years. The first option is to deposit the $31,000.03 into a fund earning a nominal rate of discount d(4) payable quarterly. The second option is to purchase an annuity-immediate with 15 level annual payments, the annuity payments computed using an annual effective rate of 6%, and then when she gets an annuity payment, to immediately invest it into a fund earning an annual effective rate of 4%. Mrs. Williams calculates that the second option produces an accumulated value that is $1,500 more than the accumulated value yielded by the first option. Calculate d(4). (Round your answer to two decimal places.) Mrs. Williams finds that she has two options for investing $31,000.03 for fifteen years. The first option is to deposit the $31,000.03 into a fund earning a nominal rate of discount d(4) payable quarterly. The second option is to purchase an annuity-immediate with 15 level annual payments, the annuity payments computed using an annual effective rate of 6%, and then when she gets an annuity payment, to immediately invest it into a fund earning an annual effective rate of 4%. Mrs. Williams calculates that the second option produces an accumulated value that is $1,500 more than the accumulated value yielded by the first option. Calculate d(4). (Round your answer to two decimal places.)
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To solve this problem we can set up the equation for the accumulated value of the first and second o... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
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