ASSIGNMENT 7

ASC453
1. Fence posts set in soil last 9 years and cost Z each while fence posts set in concrete last 15
years and cost Z + S. the posts will be needed for 35 years. What is the value of S such that
a fence builder would be indifferent between the two types of posts?

2. Given the following information:

i. Present value of a 6n-year annuity immediate of 1 at the end of every second year
is 4.760.
ii. Present value of a 6n-year annuity immediate of 1 at the end of every third year
is K
iii. Present value of a 6n-year annuity immediate of 1 at the end of every year is
9.7578
Determine K assuming an annual effective interest rate of i.

3. By using an annual effective interest rate m > 0, you are given:

i. Present value of an s-year deferred annuity immediate paying 2 per year for s
years is 6.
ii. Present value of 2 at the end of each year for 2s years, plus an additional 1 at the
end of each of the first s years is 36.
Calculate m.

4. 1,000 loan is to be repaid by per annum payments of 100 to commence at the end of the
fifth year and to continue thereafter for as long as necessary. The effective rate of discount
is 5%. Find the amount of the final payment if it is to be larger than the regular payments.

5. Perpetuity pays 1 at the beginning of every year plus an additional 1 at the beginning of
every second year. Determine the present value of this annuity.

6. Perpetuity due pays Y per year. A receives the first e payments, B receives the next e
payments and C receives the remaining payments. PV of As payments is 30 percent of the
PV of the original perpetuity. PV of Cs payments is D% of the PV of the original
perpetuity. Calculate the PV of Cs payments as a percentage of the original perpetuity.

7. Calculate 3| and 3| if the nominal rate of interest is 5% per annum, assuming (a)
compound interest, and (b) simple interest.