Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume the rate of interest is 8 % . How much would you need to set aside to provide each of the following? a .

Assume the rate of interest is 8%. How much would you need to set aside to provide each of the following?
a. $1 billion at the end of each year in perpetuity. (Enter your answer in billions rounded to 1 decimal place.)
b. A perpetuity that pays $1 billion at the end of the first year and that grows at 4% a year. (Enter your answer in billions rounded to 1 decimal place.)
c. $1 billion at the end of each year for 20 years. (Do not round intermediate calculations. Enter your answer in billions rounded to 3 decimal places.)
d. $1 billion a year spread evenly over 20 years. (Do not round intermediate calculations. Enter your answer in billions rounded to 3 decimal places.)
Answer is complete but not entirely correct.
\table[[],[a.,Present value,$,12.5,billion,,],[b.,Present value,$,25.0,billion,,],[c.,Present value,$,9.818,billion,,],[d.,Present value,$,0.491,billion,,]]
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Handbook Of Post Crisis Financial Modelling

Authors: Emmanuel Haven, Philip Molyneux, John Wilson, Sergei Fedotov, Meryem Duygun

1st Edition

1137494484, 978-1137494481

More Books

Students also viewed these Finance questions