5. (5 points) (a) Compute the value of an infinite stream of $37 annual payments beginning...

 

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5. (5 points) (a) Compute the value of an infinite stream of $37 annual payments beginning one year from today if the interest rate is 5%. (b) An annuity-due pays 100 at the beginning of each year forever. The effective annual rate of interest is 10%. What is the present value of the annuity? 6. (5 points) You can receive one of the following two sets of cash flows. Under Option A, you will receive $5,000 at the end of each of the next 10 years. Under Option B, you will receive z at the beginning of each year, forever. The annual effective rate of interest is 8%. Find the value of a such that gives these two options an equal value. 5. (5 points) (a) Compute the value of an infinite stream of $37 annual payments beginning one year from today if the interest rate is 5%. (b) An annuity-due pays 100 at the beginning of each year forever. The effective annual rate of interest is 10%. What is the present value of the annuity? 6. (5 points) You can receive one of the following two sets of cash flows. Under Option A, you will receive $5,000 at the end of each of the next 10 years. Under Option B, you will receive z at the beginning of each year, forever. The annual effective rate of interest is 8%. Find the value of a such that gives these two options an equal value.

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5 a To compute the value of an infinite stream of 37 annual payments beginning one year from today w... View the full answer