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.

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 $10,000...

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...

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