Q4. A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 yearsand then we will pay you (or your beneficiaries) $100 at the end of each year forever."A. Calculate the present value of your payments to the bank if the interest rate is 8.25%.B. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is8.25%?C. Is this a good deal?
Q4. A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 yearsand then we will pay you (or your beneficiaries) $100 at the end of each year forever."A. Calculate the present value of your payments to the bank if the interest rate is 8.25%.B. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is8.25%?C. Is this a good deal?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 8EB: You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how...
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Q4. A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 years
and then we will pay you (or your beneficiaries) $100 at the end of each year forever."
A. Calculate the
B. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is
8.25%?
C. Is this a good deal?
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