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An amount of money was invested in an account that earns interest compounded semiannually. From this...

An amount of money was invested in an account that earns interest compounded semiannually. From this investment, the investor could withdraw $2,000 at the start of the first 6-month period and at the start of each of the next nine, 6-month periods (a total of ten, 6-month periods), after which time, the account balance is zero.

Interest revenue generated from this arrangement equals:

A. The future value of the annuity due

B. The future value of the annuity due minus $20,000

C. $20,000 minus the present value of the annuity due

D. The present value of the annuity due minus $20,000

E. The present value of the annuity due

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Answer #1

The correct answer is

C) $ 20000-minus present value of the annuity due

Explaination

Total amount received from annuity = 2000*10

= $ 20000

Amount amount invested in annuity = present value of annuity due

So

Interest revenue = amount received - amount invested

= 20000 minus present value of annuity due

Thus the correct answer C) 20000 minus the present value of annuity dur

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