Question

In: Statistics and Probability

2. You have a 20-year annuity with a present value of $575,000. If the APR is...

2.

You have a 20-year annuity with a present value of $575,000. If the APR is 6%, what is
the monthly yield?

Select one:

a. None of these

b. $3761.26

c. $4439.18

d. $4119.48

e. $4325.67

Expert Solution

Data given:

Time period (in years), t = 20 years

Number of periods, n = 12 x 20 = 240

Present value of annuity, P = $575000

Rate of interest or APR, R = 6%

Rate of interest per period, r = (R/12)% = (6/12)% = 0.5%

Amount of each monthly yield, M = ?

As we know, the formula for computing the present value of an ordinary annuity is given as -

where P - present value of annuity

M - amount of each annuity payment

r - rate of interest per period

n - number of payments or periods made in the duration

Using the above formula, we can calculate the monthly yield for the given annuity as -

Thus, the amount of monthly yield for the given annuity is approximately $4119.48 .

Hence, the correct option is (D) .

orchestra answered 2 years ago

Find the present value of a 20 year annuity due where payments are $1, 000 at...

Find the present value of a 20 year annuity due where payments are $1, 000 at the beginning of the first year, third year, etc. and payments are $1, 500 at the beginning of the second year, fourth year, etc. Here effective annual interest is 5%. Hint: Draw a time diagram!!!

1) a. Find the present value of an ordinary annuity if you have a plan to...

1) a. Find the present value of an ordinary annuity if you have a plan to pay an annuity of Rial Omani B at the end of each week for A years. Bank Muscat offers the discount rate of E % compounded weekly. b. Suppose that you have deposited Rial Omani (B × E) in the special account of Bank Nizwa at the end of each semi year for C months. If the special account of Bank Nizwa offers at...

Calculate the present value of the annuity assuming that it is (1) an ordinary annuity (2)...

Calculate the present value of the annuity assuming that it is (1) an ordinary annuity (2) an annuity due. Comparing the two types of annuities, all else equal, which type is more preferable? Why? Amount of annuity=$12,000 Interest rate=7% Deposit period (years)=3 Ordinary annuity = 33696, annuity due = 31492, ordinary annuity is better because it discounts for one less year. Ordinary annuity = 31492, annuity due = 33696, annuity due is better because it discounts for one less year....

Present Value of an Annuity What is the present value of a $400 annuity payment over...

Present Value of an Annuity What is the present value of a $400 annuity payment over 6 years if interest rates are 9 percent? $670.84 $2,013.18 $238.51 $1,794.37

PRESENT VALUE OF AN ANNUITY - (a) What is the present value of an asset that...

PRESENT VALUE OF AN ANNUITY - (a) What is the present value of an asset that pays $10,000 per year at the end of the next four years if the appropriate discount rate is 5 percent? What total return would you earn if you bought this asset and it paid its expected cash flows on time each year for the next four years? Prove that you earned the same return that you would have, had you put your money in...

the present value of an annuity for 2 years, with the first payment at the end...

the present value of an annuity for 2 years, with the first payment at the end of 10 years is 40,239 pesos. If money is worth 4.94%, what is the value of an annuity for 5 years?

The present value of an annuity due is equal to the present value of an ordinary...

The present value of an annuity due is equal to the present value of an ordinary annuity times (1 + i). Select one: True False

Why does an annuity due have a higher present value than a similar ordinary annuity?

2)What is the relationship between the present-value factor and the annuity present-value factor? 3)What will $5,000...

2)What is the relationship between the present-value factor and the annuity present-value factor? 3)What will $5,000 invested for 10 years at 8 percent compounded annually grow to? How many years will it take $400 to grow to $1,671 if it is invested at 10 percent compounded annually? At what rate would $1,000 have to be invested to grow to $4,046 in 10 years? 7)What is the future value of an ordinary annuity of $1,000 per year for 7 years compounded...

What is the present value of the following annuity? 4083 every year at the end of...

What is the present value of the following annuity? 4083 every year at the end of the year for the next 7 years, discounted back tot he present at 17.61% per year, compounded annually?