Consider a perpetual security with quarterly payments. What is the payment if theinterest rate is 22% and the security trades for $100?

 

2.An investment generates a cash "ow of $50,000 in the #rst month, with the cash"ows growing at 0.25% per month forever. What is the monthly interest rate if thevalue of the investment is $8M?"

 

3.Consider a growing perpetuity that makes annual payments and has a value of$250. The #rst payment of $10 will be made in a year. The interest rate is 5%. Whatis the expeced growth rate of the payments?

 

4.You would like to withdraw $10K every year for 20 years starting in a year. Howmuch should be in your investment account today if the interest rate is 6%?

 

5.You are about to retire. You have saved $1M in your retirment account. You havecalculated that you can withdraw $8,000 per month and the money will last 25 years.What's the interest rate?"

 

6.You would like to take out a $400,000, 2% APR loan. You would like your constantmonthly payment not to exceed $2,000, with the #rst payment one month fromnow. What should be the minimum length of the loan?

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Lets go through each question one by one For a perpetual security with quarterly payments and an interest rate of 22 we can calculate the payment using the formula for the present value of a perpetuit... View the full answer