Lauren makes a $10,000 investment in the following way. She purchases a 15 year annuity with...

Lauren makes a $10,000 investment in the following way. She purchases a 15 year annuity with effective annual interest i = .05 and making constant payments at the beginning of each year (with the first payment made immediately after purchase). Immediately after receiving each yearly payment, she deposits this payment into an account earning i = .07 effective annual interest. Find the accumulated value of these deposits after the 15 years, and find the equivalent effective annual interest rate for this 15 year investment. please dont solve using excel

Solutions

Expert Solution

invesment= $10000 interest rate=.05

annual tnterest received= $500 at beginning of each year

amt deposited each year =$500 interest rate = .07

annual interest received= $35

total interest received = $535

effective interest rate= $535/$10000*100

=5.35%

jeff jeffy answered 2 years ago

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