Answer the following questions: Define an annuity (2 pts.) Suppose you have an ordinary annuity where...
- Answer the following questions:
- Define an annuity (2 pts.)
- Suppose you have an ordinary annuity where you save $3,000 per year for the next 20 years at an annual interest rate of 8%. How much will you have accumulated at the end of those 20 years? (3 pts.)
- Suppose you have an immediate annuity where you save $5,000 per year for the next 30 years at an annual interest rate of 6%. How much will you have accumulated at the end of those 30 years? (3 pts.)
Homework Answers
Annuity is a series of payments made at regular intervals .For example a person deposits $2000 each year in a savings account or regular payment of premium are all annuities.
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Define an annuity (2 pts.)
Suppose you have an ordinary annuity where...
(Solving for PMT of ordinary annuity) you want to have $50,000 by saving at the end...
(Solving for PMT of ordinary annuity) you want to have $50,000 by saving at the end of each of the next 10 years. If the opportunity cost of capital (interest rate) is 10% per year, compounded annually, how much must you save annually? Show Work Please!
To compute the value of an annuity due, multiply the value of the ordinary annuity by...
To compute the value of an annuity due, multiply the value of the ordinary annuity by . You are planning to put $10,000 in the bank at the end of each year for the next eight years in hopes that you will have enough money for a trip around the world. If you are investing at an annual interest rate of 6%, how much money will you have at the end of eight years—rounded to the nearest whole dollar? $98,975...
Suppose that for retirement purposes, over the course of 20 years, you make monthly deposits of $350.00$350.00 into an ordinary annuity that pays an annual interest rate of 7.898%7.898% compounded mon...
Suppose that for retirement purposes, over the course of 20 years, you make monthly deposits of $350.00$350.00 into an ordinary annuity that pays an annual interest rate of 7.898%7.898% compounded monthly. After those 20 years, you then want to make monthly withdrawals for 22 years, reducing the balance in the account to zero dollars. a) Find the amount of money you have accumulated in the annuity over the first 20 years: b) How much should you withdrawing monthly from your...
What is the future value of an 8 year ordinary annuity with an annual payment of...
What is the future value of an 8 year ordinary annuity with an annual payment of $600 if the interest rate is 13.5%? What is the present value of a 17 year ordinary annuity with an annual payment of $216,000 if the opportunity cost rate is 15.2%? An ordinary annuity pays $16,375 per year for 9 years. If you pay $100,000 for this annuity now, what rate of return (interest rate) will you earn? A 22 year...
What is the present value of a 17 year ordinary annuity with an annual payment of...
What is the present value of a 17 year ordinary annuity with an annual payment of $216,000 if the opportunity cost rate is 15.2%? An ordinary annuity pays $16,375 per year for 9 years. If you pay $100,000 for this annuity now, what rate of return (interest rate) will you earn? A 22 year ordinary annuity has a present value of $28,520. If the interest rate on this annuity is 12%, what is the amount of each payment?...
Present Value of Ordinary Annuity 4. After consulting with your financial advisor, you figured that you...
Present Value of Ordinary Annuity 4. After consulting with your financial advisor, you figured that you need $100,000 per year for your living during 20 years of the retirement period. You consider buying an annuity contract which will pay $100,000 at the end of every year. Assuming a rate of return of 5%, how much do you need today to buy the ordinary annuity contract? a. $1,246,221 5. After consulting with your financial advisor, you figured that you need $100,000...
In the following ordinary annuity, the interest is compounded with each payment, and the payment is...
In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. Find the amount of time needed for the sinking fund to reach the given accumulated amount. (Round your answer to two decimal places.) $235 monthly at 5.6% to accumulate $25,000. The following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. Find the accumulated...
Future value of an ordinary annuity) You are graduating from college at the end of this...
Future value of an ordinary annuity) You are graduating from college at the end of this semester and after reading the The Business of Life box in this chapter, you have decided to invest $4000 at the end of each year into a Roth IRA for the next 45 years. If you earn 7 percent compounded annually on your investment, how much will you have when you retire in 45 years? How much will you have if you wait 10...
A couple wants to have an annuity of 25,000 payable at the beginning of each year...
A couple wants to have an annuity of 25,000 payable at the beginning of each year for 10 years. If they have 20 years to save for that annuity, how much must be saved from their annual year-end bonus? Assume a 5% interest rate.
1. Calculate the accumulated value of an ordinary annuity of $4,200 a year for 6 years...
1. Calculate the accumulated value of an ordinary annuity of $4,200 a year for 6 years if the money is worth 71 2 %. 2. Find the future value of the cash flow of $600 a month for 5 years at 9% interest compounded monthly. 3. If Gabe makes a $450 deposit into his savings fund at the end of each quarter for 6 years, how much will he be able to collect at the end of the sixth year...
Present Value of Ordinary Annuity 4. After consulting with your financial advisor, you figured that you need $100,000 per year for your living during 20 years of the retirement period. You consider buying an annuity contract which will pay $100,000 at the end of every year. Assuming a rate of return of 5%, how much do you need today to buy the ordinary annuity contract? a. $1,246,221 5. After consulting with your financial advisor, you figured that you need $100,000...
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