Revision as of 19:57, 4 December 2023 by Admin (Created page with "The annually compounded discount rate is 5.5%. You are asked to calculate the present value of a 12-year annuity with payments of $50,000 per year. The first payment arrives in 6 months. Following payments arrive at one-year intervals, at 18 months, 30 months, etc. <ul class="mw-excansopts"> <li>$428,580</li> <li>$430,926</li> <li>$442,618</li> <li>$445,212</li> <li>$451,250</li> </ul> '''References''' {{cite web |url=https://alo.mit.edu/wp-content/uploads/2015/06/PS...")
Dec 04'23
Exercise
The annually compounded discount rate is 5.5%. You are asked to calculate the present value of a 12-year annuity with payments of $50,000 per year. The first payment arrives in 6 months. Following payments arrive at one-year intervals, at 18 months, 30 months, etc.
- $428,580
- $430,926
- $442,618
- $445,212
- $451,250
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.
Dec 04'23
Solution: C
[[math]]
\begin{aligned} & \mathrm{PV}_{-0.5}=\frac{50000}{0.055}\left[1-\frac{1}{1.055^{12}}\right]=\$ 430,925.89 \\ & \mathrm{PV}_0=430,925.89 \times(1.055)^{0.5}=\$ 442,617.74\end{aligned}
[[/math]]
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.