You will make deposits of $1,000 at the end of each year for 40 years in...

You will make deposits of $1,000 at the end of each year for 40 years in your investment account. After the 40th deposit, you will immediately withdraw all money from the account to buy a retirement annuity for 35 years with equal annual payments (paid at year-end) from a life insurance company. If the annual rate of return over the entire period (75 years) is 5%, how much is the annual payment from the insurance company?
The amount of your 25-year mortgage loan is $500,000, and the interest rate is 6% p.a. How much is your monthly loan payment? How much interest will you pay for the 3rd year?

Solutions

Expert Solution

Calculating Future Value at the end of Year 40,

Using TVM Calculation,

FV = [PV = 0, PMT = 1,000, T = 40, I = 0.05]

FV = $120,799.77

Calculating Annual Withdrawal,

Using TVM Calculation,

PMT = [PV = 120,799.77, T = 35, I = 0.05, FV = 0]

PMT = $7,377.45

Annual Withdrawal = $7,377.45

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 500,000, T = 300, I = 0.06/12, FV = 0]

PMT = $3,221.51

Monthly Payment = $3,221.51

jeff jeffy answered 2 years ago

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