BU111 Lecture Notes - Lecture 7: Lease
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BU111 Full Course Notes
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An annuity that goes on forever, (ex. What is the value of an investment is ay 5% preferred with a par value of if irs are at 3% (0. 05x12)/0. 03=20 pmt = (investment rate x price) r= current market rate. Payment and interest period must be the same. N= year x p number of payments a year. Adjust compounding rate to match payment frequency (this is the new r ) N years x p number of payments per year. Divide r by p to get number of payments per year. What is the present value of 4 years at payments received every six months compounded semi-annually at 3%. Sample - interest and payment period don"t match. You receive a series of coupon payments (these are interest payments for lending your money) = annuity. You receive a principal payment (1 lump sum) upon maturity (ie. you get the money that you loaned the borrower back) = single payment.
