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Unformatted text preview: 8. Matthew makes a series of payments at the beginning of each year for 20 years. The ﬁrst payment is 100. Each subsequent payment through the tenth year increases by 5% from the previous payment. After the tenth payment, each payment decreases by 5% from the previous payment. I '5 Calculate the present value of these payments at the time the ﬁrst payment is made using an annual effective rate of 7%. (A) (C)
(D)
(E) November 2005 1375 1385 1395 1405 1415 100 105' No.25" . ~19? PV 2 [00 + IOS'( ,0“ ' .95, :— ,3a«/. err 11 “(0.3% I "(£33— q )+\Iﬂq'("’°'3°‘),; 455“
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W Course FM 9. A company deposits 1000 at the beginning of the ﬁrst year and 150 at the beginning of each subsequent year into perpetuity. In return the company receives payments at the end of each year forever. The ﬁrst payment is 100. Each subsequent payment increases by 5%. Calculate the company’s yield rate for this transaction. (A)
(B)
(C)
(D) @ November 2005 4.7% 5.7% 6.7% 7.7% 8.7% PV [Devann) ‘—“ loco + L 5'0 g—IF— PU (Ion:75.) = loo/(5..;35')
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12 CourseFM 12. Megan purchases a perpetuity—immediate for 3250 with annual payments of 130. At the same price and interest rate, Chris purchases an annuityimmediate with 20 annual payments that begin at amount P and increase by 15 each year thereafter. Calculate P.
(A) 90
1 16
(C) 131
(D) 176
(E) 239 November 2005 325’0 15 Course FM 14. Payments of X are made at the beginning of each year for 20 years. These payments
earn interest at the end of each year at an annual effective rate of 8%. The interest is
immediately reinvested at an annual effective rate of 6%. At the end of 20 years, the accumulated value of the 20 payments and the reinvested interest is 5600. CalculateX.
(A) 121.67
123.56
(C) 125.72
(D) 127.18
(B) 128.50 November 2005 $600 ::>7K: 17 .. 10.x + .oXXL‘Eslia.“ 123.ré Course FM 18. A loan is repaid with level annual payments based on an annual effective interest rate of 7%. The 8th payment consists of 789 of interest and 211 of principal. Calculate the amount of interest paid in the 18th payment. (A)
(B)
(C) (E) November 2005 415 444 556 585 612 2] Course FM 20. The dividends of a common stock are expected to be 1 at the end of each of the next 5 years and 2 for each of the following 5 years. The dividends are expected to grow at a ﬁxed rate of 2% per year thereafter. Assume an annual effective interest rate of 6%. Calculate the price of this stock using the dividend discount model. (A)
(B)
(C) (E) November 2005 29 33 37 39 41 P .—
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1 I “an; + 2 “Hoe V ('0‘ '07, 23 Course FM 23. The present value of a 25year annuityimmediate with a ﬁrst payment of 2500 and decreasing by 100 each year thereafter is X. Assuming an annual effective interest rate of 10%, calculate X. (A) (B) @ (D)
(E) November 2005 11,346
13,615
15,923
17,396 18,112 26 Course FM ...
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 Fall '08
 Hubscher
 Time Value Of Money, Payment, annual effective rate, Lo, Course FM

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