What is the present value of payments with a quoted annual interest rate, with monthly compounding

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ftngyva

Business Finance

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What is the present value of payments with a quoted annual interest rate, with monthly compounding Of interest. This is calculated after winning large amount of money that will be given in 26 payments.

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Homework Set #2: Chapters 4 & 5 Due Week 4 and worth 100 points Directions: Answer the following questions or a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above. A. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. what is the present value of the payments you will receive? B. In your own words and using various bond websites, please locate one of each of the following bond ratings: AAA, BB, CCC, and D. Please describe the differences between the bond ratings. Identify the strengths and weaknesses of each rating Click here to view the grading rubric
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Explanation & Answer

Answer attached.

Running Head: FINANCE

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Finance
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FINANCE

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Part A
We find the effective annual return,
PV = -100
I = 9/12 = 0.75
FV = PV*(1+r)^n = 100 *(1+0.75%)^12
= 109.38
EAR = 109.38 – 100 = 9.38%
Using the EAR, we calculate the present value
PMT = 11,000,000/26 = 423,076.9231
EAR = 9.38%
Present value of an ordinary annuity= Pmt *((1 – (1 / (1+i)^n))/i) = 423,076.92 * ((1 –
(1/(1+9.38%)^26))/9.38%)
= 4,072,055.246
Present value of an annuity d...


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