Find the present value of an annuity.?

Find the present value of an annuity that would generate the continuous money flow R( t ) = 10 + t / 2 thousand dollars per year forever. Use a constant continuously compounded interest rate of r = .05.
Explain why the total value of this income stream is infinite.

i have an annuity question?

the money on the annuity earns interest but the statement i recieved does not indicate that this must be reported on my current income tax. the way this was explained to me was that i pay taxes on it when it is WITHDRAWN. is this true? what is the honest thing to do with this?

Why do financial planners bash fixed and indexed annuites?

I understand the philosphy of avoiding variable annuities most of the time due to the high fees but what’s the deal with fixed and indexed annuities? Anyone who has had a fixed annuity over the last decade is mountains ahead of someone who has had mutual funds. There are no fees outside of the surrender periods and they can also be set up in roth IRA’s. If the surrender penalty is within a persons investment horizon, why don’t financial planners use these products more often? Everything I have researched shows these are very safe investments, have upside market potential (indexed I mean), zero fees, and grow tax deferred. Everyone I have talked to that owns a fixed annuity is smiling right now. Please explain

Grade 11 math-compound interest, annuity, present value and mortgage…help solve question?

Suppose you deposit $255 at the end of every 6 months into an account that pays 6.4% compounded semi-annually. How much will you have after 8 years? Write to explain how you calculated the amount.

Whats wrong with privatizing SS when Chileans have done it for 30 years successfully beyond expectations?

http://www.thenewamerican.com/world-mainmenu-26/south-america-mainmenu-37/7344-chiles-privatized-social-security-program-is-30-years-old-and-prospering

As a quiet example of how privatizing Social Security works in the real world, Chile’s 30-year experiment is succeeding beyond expectations. Instead of running huge deficits to fund the old “PayGo” system, private savings now exceed 50 percent of the country’s Gross Domestic Product.

Prior to May 1, 1981, the Chilean system required contributions from workers and was clearly in grave financial trouble. Instead of nibbling around the edges to shore up the program for another few years, José Piñera, Secretary of Labor and Pensions under Augusto Pinochet, decided to do a major overhaul of the system:

We knew that cosmetic changes — increasing the retirement age, increasing taxes — would not be enough. We understood that the pay-as-you-go system had a fundamental flaw, one rooted in a false conception of how human beings behave. That flaw was lack of a link between what people put into their pension program and what they take out….

So we decided to go in the other direction, to link benefits to contributions. The money that a worker pays into the system goes into an account that is owned by the worker.

The system still required contributions of 10 percent of salary, but the money was deposited in any one of an array of private investment companies. Upon retirement, the worker had a number of options, including purchasing an annuity for life. Along the way he could track the performance of his account, and increase his contribution (up to 20 percent) if he wanted to retire earlier, or increase his payout at retirement.

How well has the system performed? John Tierney, a writer for the New York Times, went to visit Pablo Serra, a former classmate and friend in Santiago a few years ago, and they compared notes on how well their respective retirement programs were doing. Tierney brought along his latest statement from Social Security, while his friend brought up his retirement plan on his computer. It turned out that they both had been contributing about the same amount of money, so the comparison was apt, and startling, said Tierney:

Pablo could retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age. OR

Pablo could retire at age 65 with an annual pension of $70,000. That would almost triple the $25,000 pension promised [to me] by Social Security starting a year later, at age 66. OR

Pablo could retire at age 65 with an annual pension of $53,000 and [in addition receive] a one-time cash payment of $223,000.

Financing Help Please (Bonds, YTM, EAR, PV)?

1) Big Dom’s Pawn Shop charges an interest rate of 16 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. What rate should the shop report? What is the effective annual rate?

2) You want to buy a new sports car from Muscle Motors for $53,000. The contract is in the form of a 36-month annuity due at a 9.80 percent APR. What will your monthly payment be?

3) You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for 30 years, which will increase 5 percent per year. The appropriate discount rate is 8 percent. What is the present value of your winnings?

4) You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 6.35 percent APR for this 360-month loan. However, you can afford monthly payments of only $1,150, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $1,150?

5) Barcain Credit Corp. wants to earn an effective annual return on its consumer loans of 16 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?

6) Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $29 million. The CEO of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for the entire construction project. Management has decided to save $1.6 million a quarter for this purpose. The firm earns 6 percent compounded quarterly on the funds it saves. How long does the company have to wait before expanding its operations?

7) You are borrowing $5,400 to buy a car. The terms of the loan call for monthly payments for 4 years at a 5.00 percent interest. What is the amount of each payment?
One More Time Software has 9.2 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and currently sell for 85.8 percent of par. What is the current yield on bonds? What is the YTM? What is the effective annual rate?

9) Kiss the Sky Enterprises has bonds on the market making annual payments, with 17 years to maturity, and selling for $940. At this price, the bonds yield 11.0 percent. What must the coupon rate be on the bonds?

10) Staind, Inc., has 6 percent coupon bonds on the market that have 11 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 10 percent, what is the current bond price?

Need help in Business Mathematics?

1)If the salary of an employee is as follows:
Basic salary = 12,000 Rs.
Allowances = 4,000 Rs.

Then cost of the company on account of leaves (8%), group insurance/medical (4.5%) and other social benefits (6.2%) are

a) Leaves cost = 0.08 x 16000
Group insurance/medical = 0.045 x 16000
Other social benefits = 0.062 x 16000
b) Leaves cost = 0.08 x 12000
Group insurance/medical = 0.045 x 12000
Other social benefits = 0.062 x 12000

c) Leaves cost =16000+ [0.08 x 12000]
Group insurance/medical = 16000+ [0.045 x 12000]
Other social benefits = 16000+ [0.062 x 12000]

d) Leaves cost = 0.08 x 8000
Group insurance/medical = 0.045 x 8000
Other social benefits = 0.062 x 8000

2)Price of a certain item increases 5 % a year. If the price is Rs. 478 in year 2008 then what will be the price of item in year 2012.

a)578
b)573.6
c)501.9
d)*581.01

3)Suppose you buy stock in two companies A and B, both at a price of Rs. 38.25 per share in January 2008. Suppose that by July 2008, stock A has risen in value to Rs. 58.35 per share. Then for stock A the percentage change is

a)57.78%
b)34.45%
c)52.55
d)20.1 %

4)The amount you have in the bank after 3 years if you put in Rs 1000, at a 6% annual rate of interest can be calculated by

a) 1000(1 + 0.6)3
b) 1000+ ( 1000 * 0.06 * 3)
c) 1000 * [(1 + 0.06)3 -1] /0.06
d) 1000* 0.06* 3

5)If you wish to have Rs. 20, 00000 after 30 years from now, what will you need to invest this year if you earn 5% interest compounded semi annually?

a) 20, 00000(1 + 0.05)30
b) 20, 00000(1 + 0.05)60
c) 20, 00000 + (2000000*0.05*30)
d) 20, 00000 (1+0.025)60
e) 20, 00000 [(1 + 0.05)30 -1]/0.05

6)In a sinking fund, a firm makes a series of equal payments into a savings account in order to have a certain dollar amount available at some point in the future. What type of time value problem is this?

a)a present value of a dollar problem
b)a future value of a dollar problem
c)a present value of an annuity problem
d)a future value of an annuity problem
e)None of the above

7)Ali decides to save Rs. 50,000 per year so that he can make a down payment on a house in 6 years. If he makes the payments at the end of each year, assume an interest of 6% compounded monthly, how much will he have accumulated at the end of 6 years?

a) 50000[(1 + 0.06)72 -1]/ (0.06)
b) 50000[(1 – (1 + 0.06)-6]/ 0.06
c) 50000[(1 + 0.06/12)72 -1]/ (0.06/12)
d) 50000(1+0.06)6
e) 50000[(1 + 0.06)6 -1]/ (0.06)
8)If you want to withdraw Rs 25,000 at the end of each year for the next 7 years then what amount must you invest today at 5% compounded quarterly?
Q9)If for the next 7 years you save Rs. 20,000 per year then how much will you have accumulated at the end. Payments are to be made at the end of each year, assume an interest of 8% compounded semi annually?
Which function can give you correct answer of above question?

a)FV(0.08, 7, 20000, 0,0)
b)FV(0.08, 7, 20000, 0, 1)
c)FV(0.08/2, 7*2, 20000, 0, 0)
d)PV(0.08/2, 7*2, 20000, 0, 0)
e)PV(0.08, 7, 0, 20000, 1)

10)On retirement company decided that not to give a lump sum amount but will pay Rs. 40,000 over 15 years. How much amount you actually get, assuming that you could earn 5% interest, compounded annually.
Which function can give you correct answer of above question?

a)PV(0.05, 15, 40000, 0, 0)
b)ISPMT(15*2,0.05/2,40000,0,0)
c)PV(0.05/2, 15*2, 40000, 0, 0)
d)PPMT(0.05,15,40000,0,0)
e)FV(0.05,15,40000,0,0

Lab 5 Question 4 – Coupon rate, Finance question?

Below is the question- I just cant seem to figure out how to show for the rates given below as solution using a BA II calculator or any other financial calculator. Does anyone know how to solve for the rates using a calculator?

Bentley Inc. has bonds on the market making semiannual payments, with 12 years to maturity, and selling for $1,200. At this price, the bonds yield 20 percent. Note: default value for face value is $1000. What must the coupon rate be on Bentley Inc.’s bonds? Round your answer to two decimal places

The correct answer was: 24.45%

As the bonds make semiannual payments:
Time to Maturity = 12yrs × 2 = 24 years
YTM = 20% / 2 = 10%

Let’s denote C as the coupon paid each period
Bond value = [Annuity present value of the coupons] + [Present value of the face amount]
1,200 = $C × (1 – 1/1.1024)/0.10 + 1000/1.1024

Solve the equation, we get C = 122.26. Therefore, coupon rates = 2 × 12.23% = 24.45%

Thanks

Annuity: Financial Mathematics Question?

A 20 year annuity pays 100 every other year beginning at the end of the second year, with additional payments of 300 each at the ends of years 3, 9, and 15. The effective annual interest rate is 4%. Calculate the present value of the annuity.

this is a problem regarding present value of annuity.?

Justin has been contributing to a retirement fund for several years. If Justin wants to be able to receive $1000.00 a month for 10 years, what sum would have to be invested in the account. Assume an APR of 6%.

I used the present Value formula but I come out with an unrealistic answer. I believe this problem must be done on a Graphing Calculator in which u can calculate the Present/Future Value of an annuity.

You must use these symbols:

N=(total # of payments,if unknown enter 0)

I%= (APR, for 15% enter 15, for 1.2% enter 1.2, for .05% enter .05, if unknown enter 0)

PV= (Present Value,type in amount)

PMT= (Payment amount, enter as a negative value to show cash flow out.)

FV=(Future Value, type in amount)

P/Y= ( # of payments per year, if unknown enter 0)

C/Y= (# of time interest is compounded per year, should be the same as P/Y)

Thats the problem and the info needed to be plugged into the Graphing calculator. Can u guys post the work and the numbers used for the symbols. Thx

Seven Years Ago, you deposit?

Seven years ago today, you deposit $5,000 in an account that pays 4% compound annual. If you left that money in the account and reinvested all the interest payments, how much is the account worth today? What is this problem asking me to calculate?

a.) present value of an annuity
b.) future value of an annuity
c.) present value of a single payment
d.) future value of a single payment
e.) present value of a perpetuity

Future Value and Present Value?

I am in Financial Management and I am not sure which formula to use for these problems. Any help would be appreciated. Thanks!
1. Linda has decided to set up an account that will pay her granddaughter $5000 a year indefinately. How much should Linda deposit in an account paying 8 percent annyal interest?

2. Cara establishes a seven year, 8 percent load with a bank requiring annual end of the year payments of 960.43. Calculate the original principal amount.

Does anyone know if I use Present Value Annuity Due, Present Value Ordinary Annuity, Present Value, Future Value Annuity due, Future Value Ordinary Annuity or Future Value?
Thanks!!