C annuity of 50 every six months for four years

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c) Annuity of $50 every six months for four years starting at the end of the first period. The interest rate is 10% per year. d) Annuity of $50 every six months for four years starting at the end of the first period. Interest rate is 10% compounded semi-annually.
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Nominal Interest Rates and Annuities C Annuities have cash flows that occur at certain frequencies (bi-weekly, monthly, etc). C Interest rates are quoted with a compounding frequency. C When the frequency at which annuity cash flows occur differs from the frequency at which the interest rate is quoted, you have to convert the interest rate to get the effective interest rate for the frequency at which annuity cash flows occur. C Annuity payment frequency determines interest rate compounding frequency . 7
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Perpetuities C A perpetuity is an annuity that is paid in perpetuity, i.e. forever. 8
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9 Present Value of a Perpetuity C The present value of an infinite stream of cash flows ‘A’ that are made at the end of each period is equal to C where r is the effective periodic interest rate. C Another way of seeing this:
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Aside: Preferred Stock C Preferred Stock Typically no voting rights. Preferential treatment regarding payment of dividends and in case of liquidation (relative to common stock). Fixed-Rate Preferred Stock pays a fixed cash dividend each period.
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