Perpetuity, EAR and RRR test with answers

Homework #3E (Perpetuity, EAR, RRR)
Question 1
PV of Perpetuity

http://www.ultimatecalculators.com/present_value_perpetuity_calculator.html

http://www.financeformulas.net/Perpetuity.html

D
PV of Perpetuity=
r

PV = Present Value
D = Dividend or Coupon per Period
r = Interest Rate or Discount Rate

What is the present value of a $680 perpetuity discounted back to the present at 9.83 percent?
The answer should be calculated to decimal places.

Answer:
6,917.60




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, Question 2
Effective Annual Rate (EAR)
Annual Percentage Yield (APY)

http://www.calculatorsoup.com/calculators/financial/effective-annual-rate-calculator.php

http://kclau.com/wealth-management/tvm-compute-effective-annual-rate/
n
i
( )
EAR= 1+ −1
n


You plan to apply for a loan from Bank of America. The nominal annual interest rate for this loan
is 19.25 percent, compounded daily (with a 365-day year). What is the effective annual rate, or
EAR (annual percentage yield), of this loan? Round the answer to two decimal places in
percentage form. (Write the percentage sign in the "units" box)



This study source was downloaded by 100000872281541 from CourseHero.com on 09-26-2023 08:41:55 GMT -05:00


https://www.coursehero.com/file/41237553/FINC-330-Homework-3E-Perpetuity-EAR-RRRdocx/