Answer:
The student invests $60 each month and the interest rate is 6%. The interest rate is compounded monthly so we will take the interest rate as 0.5% (6/12).
The number of periods will be 420 (35*12) as the payments are made every month.
The present value is 0 as he is not making any investment at the start.
We need to find the future value of these payments, and for that we need to put these values in a financial calculator
PV= 0
PMT= 60
I= 0.5
N=420
Compute FV
FV=85,482
The total accumulated amount in the students annuity will be $85,482.
Explanation:
1) Answer: When the required return is equal to the coupon rate, the bond value is equal to the par value,
2) if the required return is less than the coupon rate the bond will sell at a premium.
Explanation:
1) The reason for this that the required return is the market or investors required rate of return for a particular bond, when the required rate and coupon rate are equal it means that the investor is getting the return he wants in coupon payments, therefore the investor will be willing to buy the bond on par value, as he is getting his required return in the form of coupon payments.
2) When the required return is less than the coupon rate the investor is getting more in coupons than he required from the bond so the bonds price will be higher than par so that the return from the coupons become equal to the required rate of return. Thats why when a bonds required return is less than the coupon it sells on a premium.
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Answer:
She needs $150,000 to fund this perpetuity.
Explanation:
In this question we need to find the present value of this perpetuity. Because this is a growing perpetuity we will need to use the formula of present value of a growing perpetuity.
PV of growing perpetuity = Payment/ R-G
The payment is the current payment the perpetuity will pay which is 6,000, R is the interest rate which is 10% and G is the growth rate of the perpetuity which is 6%. Now we will input these values in the formula in order to find the present value of the perpetuity.
6,000/0.1-0.06
=6,000/0.04
=150,000