Find the present value of the second perpetuity

Assignment Help Financial Management
Reference no: EM13870615

The present value of an increasing perpetuity due with quarterly payments $100, $200, $300, etc. is three times the present value of a perpetuity immediate with level queerly payments $500. If both perpetuities use the same annual effective interest rate, find the present value of the second perpetuity? (With level payments)

Reference no: EM13870615

Questions Cloud

Difference between Levered Banks ROE and its cost of debt : Suppose Levered Bank is funded with 2% equity and 98% debt. Its current market capitalization is $10 billion, and its market to book ratio is 1. Levered Bank earns a 4.22% expected return on its assets (the loans it makes), and pays 4% on its debt. C..
Pay fixed-receive floating swap with tenor : You have entered into a pay fixed/receive floating swap with a tenor of 10 years and standard conditions. How many payments can you calculate with certainty?
University today to make your dream reality : You dream of endowing a chair in finance at the local university that will provide the university with a cash flow of $150,000 per year FOREVER, with the first cash flow to be one year from today. If the university will be able to invest the money at..
What is the market risk premium : What is the Market Risk Premium (MRP)? Assume the following: Expected market return 9.62% (long-term US stock GAR), risk-free rate 2% (recent 10-yr Treasury yield).
Find the present value of the second perpetuity : The present value of an increasing perpetuity due with quarterly payments $100, $200, $300, etc. is three times the present value of a perpetuity immediate with level queerly payments $500. If both perpetuities use the same annual effective interest ..
Assume that the risk-free rate has not changed : On Oct 10, 2015, gold on the spot market is at $1,000 an ounce. A forward gold contract for delivery of gold on Oct 10, 2016 is priced at $1,030. Three months pass and spot gold is still at $1,000. What should be the approximate price of the Oct 10, ..
To hedge long position in put option you need : To hedge a long position in a put option you need to:
What can you do to reduce the portfolio total risk : You inherit a portfolio that is 50% invested in the SP500 and 50% in US Treasuries. The total risk of the portfolio is too high in your opinion. What can you do to reduce the portfolio total risk?
New index level be if all stocks on the DJIA increased : Assume that on a particular day, the DJIA opened at 11,960.09. The divisor at that time was .132550914. What would the new index level be if all stocks on the DJIA increased by $1.00 per share on the next day?

Reviews

Write a Review

Financial Management Questions & Answers

  What date is the end of the credit period for this invoice

Luggage World buys briefcases with an invoice date September28. The terms of sale are 2/10 EOM. What date is the end of the credit period for this invoice?

  Material ordering costs-labor costs and credit sales

Write a memo to your supervisor explaining the cash conversion cycle at your company, a manufacturer of plastic toys. Be sure to address the following: Material ordering costs, Labor costs, Credit sales (accounts receivables), Accounts payable and wa..

  What is the companys inventory turnover ratio

Company has sales of $831,000, a gross profit margin of 0.334, and inventory of $171,000. What is the company's inventory turnover ratio?

  Assumed to earn sufficient revenues to generate tax shields

Pilot Plus Pens is deciding when to replace its old machine. The machines current salvage value is $2.26 million. Its current book value is $1.46 million. If not sold, the old machine will require maintenance costs of $851,000 at the end of the year ..

  N periods and the present value of unique payment

Under an effective interest rate of 5%, the sum of the present value of an annuity which pays $4 at the end of each period for n periods and the present value of a unique payment of $100 at the end of the nth period is equal to the sum of the present..

  Combined after-tax income of its debt and equity holders

River Cruises is all­equity­financed with 100,000 shares. It now proposes to issue $250,000 of debt at an interest rate of 10% and to use the proceeds to repurchase 25,000 shares. Suppose that the corporate tax rate is 35%. Calculate the dollar incre..

  Bonds on the market-remaining maturity

Kathy wants to buy bonds on the market with 10.5 years to remaining maturity, a current yield to maturity of 10%, and current price of 102 (total par - $1,000,000). The bonds make semi annual payments. What must the annual coupon rate be on the bonds..

  Largest market capitalization stocks traded

The FTSE 100 is an index of the 100 largest market capitalization stocks traded on the London Stock Exchange. You think that 100 stocks are too much to keep up with, so you want to drop that number to 75. By doing this, what is the percentage drop in..

  Prepare simple balance sheet of assets and liabilities

Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received.

  1 what is the present value of the following set of cash

1. what is the present value of the following set of cash flows at an interest rate of 6 100 now 600 three years from

  Calculating the cost of equity

Suppose stock in Boone Corporation has a beta of .90. The market rate premium is 7 percent, and the risk-free is 8 percent. Boone's las dividend was $1.80 per share, and the dividend is expected to grow at 7 percent indefinitely. The stock currently ..

  Describe business intelligence

Distinguish among surveys, experiments and observational methods of primary data collections. Cite examples of each method. Define and give an example of each of the methods of gathering survey data. Under what circumstances should researchers choose..

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