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.

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago

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,...

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.

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