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Chapter 3 Section 4

# Chapter 3 Section 4 - of this perpetuity 25(S09T1 Tyler has...

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Chapter 3 Section 4 21. (S12HW) A perpetuity immediate pays 10,000 per month.The interest rate earned by the perpetuity is 8% compounded monthly. Calculate the present value of this perpetuity. 22. (S12HW) Mohamad is the beneficiary of a trust fund. Mohamad and his descendents will receive a payment of 1000 at the beginning of each month forever. Using an annual effective interest rate of 4%, determine the current value of these payments. February 1, 2012 23. (S08Q2) Purdue has asked our class to fund a scholarship for actuarial students. The scholarship will pay 1000 annually with the first payment being made immediately. Our contributions will earn an annual effective rate of 5%. How much must our class donate in order for the scholarship to continue forever? 24. (S11HW) Katie buys a perpetuity due of 1000 per month for 100,000. Calculate the annual effective rate of interest used to calculate the price

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Unformatted text preview: of this perpetuity. 25. (S09T1) Tyler has inherited \$1 million. He has decided to use his inheritance to purchase one of the following: a. A 30 year annuity immediate with annual payments of 106,079.25; or b. A perpetuity due with quarterly payments of P. Both options are based on the same interest rate. Calculate P. 26. (S11HW) The value of a perpetuity immediate where the payment is P is 1000 less than the value of a perpetuity due where the payment if P. Calculate P. 27. (S12HW) A perpetuity is funded by a donation of 500,000. Payments of P are to be made at the end of every second year. In other words, P will be paid at time 2, 4, 6, etc. If the fund earns an annual effective interest rate of 8%, calculate P. Answers: 21. 1,5000,000 22. 306,461.05 23. 21,00024. 12.8178% 25. 23,545.91 26. 100027. 83,200...
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Chapter 3 Section 4 - of this perpetuity 25(S09T1 Tyler has...

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