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Eleanor Spryzak has endowed her alma mater with a scholarship that is designed to pay out a sum of money to a worthy student every year forever. The scholarship amount increased in value by 3% every year. Which terms most accurately describe these assets?
annuity
perpetuity
growth perpetuity
assets with single cash flow
What is the value of a share of a firms stock when the firm is expected to pay a $2.8 per share dividend at the end of each year and the annual discount rate is $7.5%
$448
$37.33
$39.61
$33.67
What is the present value of a lease on a warehouse, where the tenants have a lease that goes into perpetuity and have agree to pay $300 at the end of each month of the lease with an annual discount rate of 8%.
$3,750
$540,000
$45,000
$38,899
Your company just signed a 20 years lease for a new office. The lease requires that your firm pay to $1,000 of the end of each month over the life of the lease. If the current annual rate is 9% what is the present value of this annuity stream?
11,111
9,129
111,145
109,543
Peter Lords financial advisor has suggest ed that he purchase a piece of land in an area of town that is being target for development. Peters plan is to purchase the land and then sell it for a profit when demand in the area increases. Which terms most accurately describe these assets?
annuity
perpetuity
growth perpetuity
assets with single cash flow
An annuity due is an annuity in which the first payment occur immediately. Knowing that, which of the following statements is true?
The future value of a 10 year ordinary annuity exceeds the future value of a 10 year annuity due.
The present value of a 10year ordinary annuity is equal to that of a 10years annuity due.
The present value of a 10year annuity due exceeds the present value of a 10year ordinary annuity.
More information is needed to solve this problem.
For perpetuity is needed to solve this problem at a constant rate (g). What will the present value of the perpetuity approach as g approaches zero?
0
1
cash flow/r
infinity
A bond issued by the British government pays a coupon of 100 pounds on January1 of every year for 20 years. Which term most accurately describes these assets?
annuity
Growing perpetuity
Perpetuity
Assets with single cash flow
Suppose you invest $800 in a mutual fund at the end of each year for the next 30 years and the fund earns an annual rate of return of 10%. What will be the value of your retirement fund after 30 years?
$131,595
$151,791
$291,235
$161,582
You want to invest $200 at the end of each month until you have reached your goal of a total balance of $100,000. You plan to invest in an account that earns an annual rate of 8%. How many years will it take to earn the $100,000
48.25 years
7.14 year
38.81 year
18.39 years
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