Annuity symbols based on effective annual interest rate

Assignment Help Financial Management

Reference no: EM13870714

A woman wants to prepare for retirement. On her 25th birthday she begins making monthly deposits of $Y into a fund which earns an annual effective interest rate of 8%. The last deposit is one month prior to her 65th birthday. On her 65th birthday she uses the fund to purchase a 30-year annuity-due which pays $X each six months for 10 years, and $2X each six months for the remaining 20 years.

(a) Write an expression for X/Y in terms of annuity symbols based on an the 8% effective annual interest rate.

(b) Write an expression for X/Y in terms of annuity symbols based on effective interest rates for time periods which correspond to the payment periods.

Reference no: EM13870714

Questions Cloud

What is the present value of this two-year loan : Your car loan requires payments of $200 per month for the first year and payments of $400 per month during the second year. The annual interest rate is 12% and payments begin in one month. What is the present value of this two-year loan?

Funding jill morans retirement annuity : Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran, by contract, will retire at the end of exactly 12 years. How large a sum must Sunrise accumulate by the end of ye..

What must the beta be for the other stock in your portfolio : You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.15 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio?

What must the beta of this stock be : A stock has an expected return of 14.6 percent, the risk-free rate is 5.70 percent, and the market risk premium is 7.3 percent. Required: What must the beta of this stock be?

Annuity symbols based on effective annual interest rate : A woman wants to prepare for retirement. On her 25th birthday she begins making monthly deposits of $Y into a fund which earns an annual effective interest rate of 8%. The last deposit is one month prior to her 65th birthday. Write an expression for ..

Savings account with discount rate per year : Danielle deposits $12,000 in a savings account with a discount rate of 10% per year. After 15 years, Danielle moves the money to an account that accumulates at a force of interest of 8%. At that same time, Danielle begins withdrawing money continuous..

What must the expected return on the market be : A stock has an expected return of 10.2 percent, its beta is 1.03, and the risk-free rate is 6.40 percent. What must the expected return on the market be?

Annual coupon rate paid semi annually : A few years ago Spider Web INC issued bonds with a 8.23 percent annual coupon rate paid semi annually. The bonds have a par value of $1000 a current price of $1092 and will mature in 20 years. What would the annual yield to maturity be on the bond if..

New issue of preferred stock : E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a 11.00 percent return on this stock, how much shoul..

User Account

All Pages