What is the present value of income stream

Assignment Help Financial Management
Reference no: EM131010886

At a constant interest rate of 15%, compounded annually, what is the present value of an income stream paying $50 next quarter and growing at 2% per quarter until the end of the third year? From that point on it grows at 1% per quarter indefinitely.

Reference no: EM131010886

Questions Cloud

Withdraw each year in your retirement : You are planning your retirement in 10 years. You currently have $165,000 in a bond account and $605,000 in a stock account. You plan to add $7,500 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..
Bank account to cover college expenses : Beginning three months from now, you want to be able to withdraw $2,900 each quarter from your bank account to cover college expenses over the next four years. If the account pays .69 percent interest per quarter, how much do you need to have in your..
What is the internal rate return of the fix asset : One business want to buy a computer size system that cost $15,000 and it has a utility life of 9 years. The system would generate a cash flow after tax of $2,205.25 each year. What is the internal rate return of the fix asset?
Compute the future value in year : Compute the future value in year 9 of a $3,000 deposit in year 1 and another $2,500 deposit at the end of year 5 using a 9 percent interest rate. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
What is the present value of income stream : At a constant interest rate of 15%, compounded annually, what is the present value of an income stream paying $50 next quarter and growing at 2% per quarter until the end of the third year? From that point on it grows at 1% per quarter indefinitely.
Different frequency of compounding : Given $100, you are interested in how much money will you get 1 years later with different frequency of compounding
How much will you have accumulated at the end of year : You invest $1,000 a year for ten years at 8 percent and then invest $2,000 a year for an additional ten years at 8 percent. How much will you have accumulated at the end of the 20 years?
Additional contribution is made to the fund : You started an education fund for your child. You are expecting him/her to attend college 18 years from now. According to statistics, the expected amount you will need 18 years later should be $300,000. If the fund provides a rate of return of 10% pe..
Default always occur half way through a year : Assume that the default probability for a company in a year, conditional on no earlier defaults is X and the recovery rate is R. The risk-free interest rate is 5% per annum. Default always occur half way through a year.

Reviews

Write a Review

Financial Management Questions & Answers

  In the hope of high returns venture capitalists provide

in the hope of high returns venture capitalists provide funds to finance new start up companies. however potential

  What is the expected return on the portfolio

You own a portfolio that has $1,900 invested in Stock A and $3,000 invested in Stock B. Assume the expected returns on these stocks are 8 percent and 14 percent, respectively. Required: What is the expected return on the portfolio? (Do not round inte..

  Relevant measure of risk for capital budgeting purposes

Which of the following is the most relevant measure of risk for capital budgeting purposes?

  What do financial managers look for when they analyze

What is risk aversion? If common stockholders are risk averse, how do you explain the fact that they often invest in very risky companies?

  Tricare hospital is a for-profit hospital that has a taxable

Tricare Hospital is a for-profit hospital that has a taxable income of $780,000 and the tax rate is 28%. 1.a. What is amount of the taxes to be paid?   1.b. What is Tricare net income

  Common stock and the investment banking process

Which of the following statements concerning common stock and the investment banking process is NOT CORRECT?

  Year-end the exchange rate should be approximately

The spot rate for the Argentine peso is $0.3600 per peso. Over the year, inflation in Argentina is 10 percent and U.S. inflation is 4 percent. If purchasing power parity holds, at year-end the exchange rate should be approximately ______________ doll..

  Product offerings to reach a wider range of customers

Home Furnishings is expanding its product offerings to reach a wider range of customers. The expansion project includes increasing floor inventory by $656,000 and increasing its debt to suppliers by 85 percent of that amount.

  Implied price volatility of the underlying stock price

A six-month Twitter call option with an exercise price of $50.00 was traded at $4.25 per option on February 27, 2015. Assume that the risk free rate was 1.2% per year and stock price for Twitter on February 27, 2015 was $48.08. Twitter Inc. does not ..

  Depreciated straight-line to zero

Your firm is contemplating the purchase of a new $550,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $54,000 at the end of that time. You will save $290,000 before..

  What is your current mortgage balance outstanding

Suppose you currently have a mortgage with 10 years remaining with annual payments (the next one coming in exactly one year) at a rate of 6%. The original mortgage amount was a 20-year mortgage for $1 million. What is your current mortgage balance ou..

  Earning a real rate of return on an investment

If the current inflation rate is 4.2% and you are earning a real rate of return on an investment of 3.8%, then the nominal rate on this investment is closest to __________.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd