document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1200990>Question 1200990</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Asset X generates a perpetual stream of cash flows of $100,000 every 3 months. The relevant interest rate is 12%, compounded quarterly. How much would you pay to buy Asset X today if the first payment occurs right away? (5 marks) </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #835246 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=835246\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> the stream of payments is 100,000 evry 3 months, starting right away.<BR>\n" );
document.write( "the interest rat is  12% compounded quarterly = 3% per quarter.\r<BR>\n" );
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document.write( "pv = c/r is the formula used.<BR>\n" );
document.write( "pv is the present value<BR>\n" );
document.write( "c is the perpetual cash flow every time period.<BR>\n" );
document.write( "r is the interest rate per time period.\r<BR>\n" );
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document.write( "the pv in this problem is equal to 100,000 / 3% which is equal to 100,000 / .03 which is equal to 3,333,333.333333.........\r<BR>\n" );
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document.write( "this is equal to 3,333,333.33, when rounded to the nearest penny.\r<BR>\n" );
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document.write( "thisi assumes the payments are made at the end of each time period.\r<BR>\n" );
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document.write( "if the payment are made at the beginning of each time period, then the present value is 100,000 more to be equal to 3,433,333.33.\r<BR>\n" );
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document.write( "i used the texas instruments business analyst 2 to determine this.\r<BR>\n" );
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document.write( "it can also be done with the finanicial calculator at <a  rel=nofollow HREF= \"https://arachnoid.com/finance/\" target = \"_blank\">https://arachnoid.com/finance/</a>, as shown below.\r<BR>\n" );
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document.write( "<IMG STYLE=\"max-width:80%;\" src = \"http://theo.x10hosting.com/2023/031601.jpg\">\r<BR>\n" );
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document.write( "<IMG STYLE=\"max-width:80%;\" src = \"http://theo.x10hosting.com/2023/031602.jpg\">\r<BR>\n" );
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document.write( "the present value of the first payment made right away is the the first payment.<BR>\n" );
document.write( "that is added to the total present value from the formula.\r<BR>\n" );
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document.write( "note that i should have entered the payment as positive because that would be money coming in.<BR>\n" );
document.write( "in that case, the present value would have been negative because what would be money going out (how much you would invest).\r<BR>\n" );
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