Nominal interest rate, Financial Management

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

 

Posted Date: 2/22/2013 4:50:39 AM | Location : United States







Related Discussions:- Nominal interest rate, Assignment Help, Ask Question on Nominal interest rate, Get Answer, Expert's Help, Nominal interest rate Discussions

Write discussion on Nominal interest rate
Your posts are moderated
Related Questions
It is a policy feature of permanent life insurance that permits policyholders to left any dividends obtained with the insurer, where the dividends can gain interest. Accumulation o

applicability of an operating cycle in vegetable growing in uganda

Explain the basic differences between the operation of a currency forward market and a futures market. Answer:  The forward market is an OTC market in which the forward contract

QUESTION (a) Describe briefly three methods of electronic payment. (b) (i) Explain briefly the term E-Billing. (ii) Outline three advantages of E-Billing. (c) Why is c

Question 1: Give an account of the role of governmental bodies and officials in the making of public policies. Question 2: What do you understand by the term "Governmen

Q. Describes Working Capital. Briefly describe the techniques utilized in making working capital forecast or Estimating Working Capital Requirements? Ans:- Meaning of Wo

Norfolk Ltd is specialized in producing & selling air conditions.  In 2010, the manufacturing cost per unit included:

How and why does working capital influence the incremental cash flow estimation for a planned large capital budgeting project?  Explain. Many large projects need additional worki

using the operating cycle and any other financial management knoweledge,dicuss the applicability of such a cycle to the poultry biussiness in uganda (consider broilers)

Question : (a) A company wants to purchase a plant for its expanding operations. The desired plant is available at Rs 300,000 in cash. Alternatively, the company has the option