Perpetuity with annually compounded discount rate

Assignment Help Financial Management

Reference no: EM131304616

In 30 years, Andy plans on setting up a fellowship fund for his wife's school that pays out $100, 000 per year in perpetuity with an annually compounded discount rate of 5%. In order to set up the fund in 30 years, how much does Andy need to save each year (starting this year) assuming he can get a semi-annually compounded return of 10% per annum on his savings for the next 30 years?

Reference no: EM131304616

Questions Cloud

Bonds on market making annual payments : Barnes Enterprises has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a price of $972. At this price, the bonds yield 8.4 percent. What must the coupon rate be on the bonds?

What is the stocks current intrinsic stock price : A company is expected to have free cash flows of $0.75 million next year. The weighted average cost of capital is WACC = 10.5%, and the expected constant growth rate is g = 6.4%. The company has $2 million in short-term investments, $2 million in deb..

What is a share of netwonders common stock worth : Assume NetWonders is operating in a new industry that has recently caught on with the public. The latest annual dividend D0, paid yesterday, was $1. Due to high growth in sales, a 25% growth rate in cash dividends is expected over the next two years...

What is the bonds current yield and yield to maturity : A bond matures in 12 years and pays an 8 percent coupon rate paid semi-annually. The bond has a face value of $1,000, and currently sells for $$1310. What is the bond’s current yield and yield to maturity? If rates on bonds of similar risk and maturi..

Perpetuity with annually compounded discount rate : In 30 years, Andy plans on setting up a fellowship fund for his wife's school that pays out $100, 000 per year in perpetuity with an annually compounded discount rate of 5%. In order to set up the fund in 30 years, how much does Andy need to save eac..

Maximum acceptable payback period : Nova Products has a 6 year maximum acceptable payback period. The firm is considering the purchase of a new machine and must choose between two alternatives. Based on their payback? periods, which machine should the firm? accept? First, second or nei..

The fund and expects to have cash inflows : Monty has been hired to run a pension fund for Dasdin Company Limited, a small manufacturing firm. The firm currently has 5 million in the fund and expects to have cash inflows of $2 million a year for the first 5 years followed by cash outflows of $..

What share price is there a margin call : A trader buys 100 shares of a stock on margin. The price of the stock is $30. The initial margin is 60% and the maintenance margin is 40%. How much money does the trader have to provide initially? For what share price is there a margin call.

Ten-year fixed-rate investments : A company’s investments earn LIBOR minus 0.60%. Explain how it can use the quotes in Table 5.5 to convert them to (a) three-, (b) five-, and (c) ten-year fixed-rate investments.

User Account

All Pages