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problem1. You are given two series of the payments. Series A is perpetuity with payments of 1 at the end of each of 1st 2 years, 2 at the end of each of next 2 years, 3 at end of each of next 2 years, and so on. Series B is perpetuity with payments of K at the end of each of 1st 3 years, 2K at the end of each of the next 3 years, 3K at the end of each of the next 3 years, and so on. The present values of the two series of payments are equivalent. Compute K.

A) 3i/2
B) 3d/2
C) a 3| / a 2|
D) a 3| / ä 2|
E) s with 2 dots 3| / s with 2 dots 2|

problem2. Morris makes the series of payments at the end of each year for 19 years. The 1st payment is 100. Each subsequent payment through the tenth year increases by 5% from the previous payment. After the tenth payment, each payment reduces by 5% from the previous payment. Compute the present value of these payments by using the annual effective rate of 7%.

A) 1274
B) 1294
C) 1314
D) 1334
E) 1354

problem3. Common stock S pays a dividend of 35 at the end of 1st year, with each subsequent annual dividend being 4% greater than the previous one. Mary purchases the stock at a theoretical price to earn an anticipated annual effective yield of 8%. Immediately after getting the 12th dividend, Mary sells the stock for a price of P. Her annual effective yield over the 12-year period was 6.75%. Compute P.

Financial Accounting, Accounting

  • Category:- Financial Accounting
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