Question

In: Finance

a. You will receive an annuity payment of $1,200 at the end of each year for...

a. You will receive an annuity payment of $1,200 at the end of each year for 6 years. What will be the total value of this stream of income invested at 7% by the time you receive the last payment?

b. How many years of investing $1,200 annually at 9% will it take to reach the goal of $12,000?

c. If you plan to invest $1,200 annually for 9 years, what rate of return is needed to reach your goal of $15,000?

Solutions

Expert Solution

a)

b)

Hence, It will take 7.45 years

c)

Hence, Rate of return is 8.02%

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Assume you are to receive a 10-year annuity with annual payments of $800. The first payment...
Assume you are to receive a 10-year annuity with annual payments of $800. The first payment will be received at the end of year 1, and the last payment will be received at the end of year 10. You will invest each payment in an account that pays 7 percent compounded annually. Although the annuity payments stop at the end of year 10, you will not with draw any money from the account until 20 years from today, and the...
You receive an inheritance of a thirty-year annuity, which pays 1 at the end of the...
You receive an inheritance of a thirty-year annuity, which pays 1 at the end of the first year, 2 at the end of the second year, 1 at the end of the third year, 4 at the end of the fourth year, 1 at the end of the fifth year, etc. This pattern will continue such that 1 will be paid out at the end of 29th year and 30 will be paid out at the end of the 30th...
Would you rather receive: $5,500 at the end of three years, $1,200 per year for 7...
Would you rather receive: $5,500 at the end of three years, $1,200 per year for 7 years or $750 per year for 15 years if the discount rate is 20%? 5a) Would your answer change if discount rate is 2%? If the answer does change, explain in a simple sentence “why”/what happened?
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...
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.
Dr.Arrowhead will receive $150,000 per year for the next 20 years as an ordinary annuity payment...
Dr.Arrowhead will receive $150,000 per year for the next 20 years as an ordinary annuity payment for a high-tech slingshot weapon he invented. If a 6 percent rate is applied, should he be willing to sell out his future rights now for $2,000,000?
You are offered an annuity that will pay you $10,000 at the end of each year for 20 years, with the first payment being in 10 years from today.
You are offered an annuity that will pay you $10,000 at the end of each year for 20 years, with the first payment being in 10 years from today. If the interest rate is 12% annually, what is the annuity worth to you today?
Annuity payments are assumed to come at the end of each payment period (termed an ordinary...
Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come at the beginning of each period (termed an annuity due). What is the future value of a 13-year annuity of $3,500 per period where payments come at the beginning of each period? The interest rate is 10 percent. Use Appendix C for an approximate answer, but calculate your final answer using the formula and...
Annuity payments are assumed to come at the end of each payment period (termed an ordinary...
Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come at the beginning of each period (termed an annuity due). What is the future value of a 10-year annuity of $2,600 per period where payments come at the beginning of each period? The interest rate is 7 percent. Use Appendix C for an approximate answer, but calculate your final answer using the formula and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT