Morgan Jennings, a geography professor, invests $96,000 in a parcel of land that is expected to...
Morgan Jennings, a geography professor, invests $96,000 in a
parcel of land that is expected to increase in value by 16 percent
per year for the next eight years. He will take the proceeds and
provide himself with a 12-year annuity.
Assuming a 16 percent interest rate, how much will this annuity be?
Homework Answers
Annuity is compounded as below:
Annuity at year 12 = Investment*(ACFi,n)
- Here Investment/deposit = $96000
- i interest rate= 16%
- n years = 12 years
- ACF = Annuity compound factor ( will get in websites)
Implies : 96000(30.850)
Annuity = $2961600.
reason for 30.850 = ACF at the interest rate 16% and maturity 12 years
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