Nominal interest rate, Financial Management

Assignment Help:

You are considering an investment in a 40-year security. The security will pay $25 a year at the end of each of the first 3 years. The security will then pay $30 a year at the end of each of the next 20 years. The nominal interest rate is assumed to be 8%, and the current price (present value) of the security is $360.39. Given this information, what is the equal annual payment to be received from Year 24 through Year 40 (for example, for 17 years)?

$25 a year for the first 3 years

$30 at the end of each of the next 20 years

With a financial calculator, enter the following:

PMT = - $25,   N = 3 years,   I/Y = 8%,   FV = 0,   CPT PV for the 1st 3 years = $64.42

PMT = - $20,   N = 20 years,   I/Y = 8%,   FV = 0, CPT PV for the next 20 years = $193.36

N = 17 years,   I/Y = 8%,   FV = 0,   PV = - $360.39,   CPT PMT = $39.50

 


Related Discussions:- Nominal interest rate

Callable bonds and puttable bonds, Convertible bonds can be classified into...

Convertible bonds can be classified into different types such as callable bonds and puttable bonds. These bonds are discussed as follows: Basics of Callable Bonds A callabl

Differences between indirect costs and direct costs, a) Variable costs: Rem...

a) Variable costs: Remuneration of flight attendants, Meals and drinks onboard, Fuel. Fixed costs: promotions and Advertising, Remuneration of administrative staff and Airport c

Brixton plans to sell the applicable computer, Brixton Products is consider...

Brixton Products is considering the purchase of a new $520,000 computer-based entry order system.  The cost of the system will be depreciated on a straight-line basis over its five

State the types of integration, State the Types of integration ...

State the Types of integration Types of integration Horizontal Target company has same operations, and is in the same industry

Demand and supply shocks, Demand and Supply Shocks The influence of the...

Demand and Supply Shocks The influence of the above macroeconomic factors on the economic performance can be analyzed by classifying their impact on the economy as a supply or

Enumerate the securities and investment analysis, Enumerate the Securities ...

Enumerate the Securities and Investment Analysis Purchase of bonds, stocks and othersecurities involve analysis and techniques which are highly specialized. An investorshoul

Steps in budgetary control, STEPS IN BUDGETARY CONTROL 1. Quantificati...

STEPS IN BUDGETARY CONTROL 1. Quantification of plans in relation to sales, production, distribution and finance in terms of objectives and goals set by the management. That i

Challenges facing by the finance manager, FUNCTIONS / RESPONSIBILITIES / CH...

FUNCTIONS / RESPONSIBILITIES / CHALLENGES FACING THE FINANCE MANAGER Today's finance manager is facing a lot of challenges, which are the direct result of the dynamic growth in

What is capital rationing, What is capital rationing? Should a firm practic...

What is capital rationing? Should a firm practice capital rationing? Why? Capital rationing is the practice of putting dollar limits on what will be invested in new capital bud

Prepare monetary statements using accounting standards, Entity A is signifi...

Entity A is significantly smaller than B in terms of revenue and would not impact LOP's revenue to the same extent. However A earns a noticeably better gross profit margin at 26% a

Write Your Message!

Captcha
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