You are offered a 12-year annuity of $10,000 annual payments. However, the annuity begins in 8...

You are offered a 12-year annuity of $10,000 annual payments. However, the annuity begins in 8 years (you will not receive any payments for 8 years, but will then receive $10,000 at the end of each year for 12 years. If the discount rate is 5% per year (compounded annually), what is the current value of the annuity?

Expert Solution

Value of annuity at Year 7 =Annual Payments*((1-(1+r)^-n)/r) =10000*((1-(1+5%)^-12)/5%) =88632.5164
Current Value of annuity =Value of annuity at Year 7 /(1+r)^7 =88632.5164/(1+5%)^7 =62989.47

jeff jeffy answered 2 years ago

You are offered a 18-year annuity of $10,000 annual payments. However, the annuity begins in 7...

You are offered a 18-year annuity of $10,000 annual payments. However, the annuity begins in 7 years (you will not receive any payments for 7 years, but will then receive $10,000 at the end of each year for 18 years. If the discount rate is 6% per year (compounded annually), what is the current value of the annuity?

You are offered a 16-year annuity of $10,000 annual payments.However, the annuity begins in 9...

You are offered a 16-year annuity of $10,000 annual payments. However, the annuity begins in 9 years (you will not receive any payments for 9 years, but will then receive $10,000 at the end of each year for 16 years. If the discount rate is 7% per year (compounded annually), what is the current value of the annuity?

You are offered an annuity that will pay you 10,000 at the endof each year...

You are offered an annuity that will pay you 10,000 at the end of each year for 20 years, with the first payment being in 10 years from today. If the interest rate is 12% annually, what is this annuity worth to you today?Martha receives $1000 on the first of each year. Stewart receives $100 on the last day of each year. Both Martha and Stewart will receive payments for 11 years. At an 8% discount rate, what is the...

A 12-year annuity of $225 monthly payments begins in 7 years (the first payment is at...

A 12-year annuity of $225 monthly payments begins in 7 years (the first payment is at the end of the first month of year 7, so it's an ordinary annuity). The appropriate discount rate is 8%, compounded monthly. What is the value of the annuity 5 years from today? $20,786.13 $15,109.87 $17,722.18 $16,363.98

You are thinking of purchasing an annuity with annual payments of $400. However, unlike previous annuities...

You are thinking of purchasing an annuity with annual payments of $400. However, unlike previous annuities you’ve seen, this one pays the initial payment of $400 today (not important, but the technical term for this is an annuity due). The annuity pays a total of 12 payments. If the discount rate is 6%, what is the present value of the product?

You purchase a 10 year annuity with payments at the end of each year for $10,000

You purchase a 10 year annuity with payments at the end of each year for $10,000 (where for this annuity effective annual interest is 4%). Immediately after you receive payments, you deposit the payment into an account earning 5% effective annual interest. How much is in this account at the end of 10 years? Use this to find the equivalent effective annual interest rate for this $10, 000 investment over this 10 year period.

You purchase a 10 year annuity with payments at the end of each year for $10,000...

You purchase a 10 year annuity with payments at the end of each year for $10,000 (where for this annuity effective annual interest is 4%). Immediately after you receive payments, you deposit the payment into an account earning 5% effective annual interest. How much is in this account at the end of 10 years? Use this to find the equivalent effective annual interest rate for this $10, 000 investment over this 10 year period. please answer all parts of the...

Question

You are offered a 12-year annuity of $10,000 annual payments. However, the annuity begins in 8...

Solutions

Expert Solution

Related Solutions