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
Suppose the bid-ask spot prices for one British pound are $1.50 and $1.60 respectively. 1. Compute the bid-ask prices for one US dollar in terms of British pound. 2. Suppose

Calculate Debt or Equity Ratio XYZ LIMITED Key data related to XYZ for last three years is as follows:   2011/12 2010/12

Question : (a) The role of the Public Expenditure Management System (PEMS) is to allocate and use resources responsively, efficiently and effectively'. Briefly explain the abo

What action(s) should be take place if analysis of pro forma financial statements reveals positive trends?  Negative trends? While analyzing the pro forma statements, managers fre

Q. Board of Directors Board of Directors - Individuals responsible for overseeing the affairs of an entity including the election of its officers. Board of a CORPORATION which

Strategies of Hedge Funds: Hedge funds use a range of different strategies, and each fund manager can argue that he or she is unique and could not be compared to other manager

Question: Cinderella invests the following sums of money in common stocks having the expected returns as detailed below: (a) What is the expected return of Cinderella's por

Calendar Studies These attempted to predict rates of return during a calendar year and examine if there is any particular observable pattern in the rates of return on the stock

The horizon price can be determined by incorporating Option-Adjusted Spread (OAS) into a total return analysis. But this requires a valuation mo

discuss the applicability of financial management in respect to poultry farming in uganda