Annuity Plan A has an initial annual payment that starts at $10,000 and grows at 5%...

Annuity Plan A has an initial annual payment that starts at $10,000 and grows at 5% per year. Plan B has a flat payment of $12,500 for the 10 years.

a. Which 10 year annuity is better, if the annual r=8%?

b. At what discount rate would the annuity owner be indifferent between the two plans?

Expert Solution

jeff jeffy answered 2 years ago

An annuity-immediate with 20 annual payments starts with a payment of 300 and each payment thereafter...

An annuity-immediate with 20 annual payments starts with a payment of 300 and each payment thereafter is 25 more than the previous payment. The effective annual interest rate is 5%. Calculate the present value. Be sure to include the appropriate equation or expression of value that you use. Instead of a 20 year annuity-immediate, it is a perpetuity. What would the present value be in that case?

A loan with a current value of 34,500 has a payment plan that starts with a...

A loan with a current value of 34,500 has a payment plan that starts with a high end of year payment that goes down by the same amount each year until the loan is paid off. Using an interest rate of 8.0% and the first year payment of 8200, calculated by how much the end of year payment will go down to pay off the loan after just 7 years. Note use the sign to show if the payment goes...

Consider a geometrically increasing annuity immediate. It's initial payment is $1000, and every following annual payment...

Consider a geometrically increasing annuity immediate. It's initial payment is $1000, and every following annual payment is 1.03 times the payment before it. The annual effective rate is 0.04 over a 10 year term. Find its present value.

What is the annual payment on a $10,000 loan, 7% interest for 5 years?

A payment system starts with an initial payment of $40 at the end of year 1,...

A payment system starts with an initial payment of $40 at the end of year 1, $42.8 at the end of year 2, and a payment of $45.60 at the end of year 3. This payment system follows ............................... A. Either (geometric) or ( Arithmetic ) B. a geometric gradient C. Neither ( geometric ) nor ( Arithmetic ) D. Arithmetic Gradients

What is the annual interest rate, if $10,000 grows to $12,166 over 5 years? (Please indicate...

What is the annual interest rate, if $10,000 grows to $12,166 over 5 years? (Please indicate all steps taken)

$10,000 is used to purchase an appropriate size annuity that has level annual payments for 15...

$10,000 is used to purchase an appropriate size annuity that has level annual payments for 15 years. The price of the annuity is based on an effective annual rate of 12%. As each payment is received, it is put into a fund that earns an effective annual rate of 6.4%. (a) Determine the accumulated value of the investment at the end of 15 years. (b) If the $10,000 were put into a fund that was to produce the same final...

You are offered a 16-year annuity of $10,000 annual payments.However, the annuity begins in 9...

You are offered a 16-year annuity of $10,000 annual payments. However, the annuity begins in 9 years (you will not receive any payments for 9 years, but will then receive $10,000 at the end of each year for 16 years. If the discount rate is 7% per year (compounded annually), what is the current value of the annuity?

calculate a loan amortization schedule for a $10,000 loan, 5% annual interest, one payment a year...

calculate a loan amortization schedule for a $10,000 loan, 5% annual interest, one payment a year for 10 years, starting on 1/1/2010. All calculations must be shown, i.e., do not use a “package” to complete this question. Loan period starts from 1/1/2010. I mean the first payment is to be made on 1/1/2010.

You are offered a 12-year annuity of $10,000 annual payments. However, the annuity begins in 8...

You are offered a 12-year annuity of $10,000 annual payments. However, the annuity begins in 8 years (you will not receive any payments for 8 years, but will then receive $10,000 at the end of each year for 12 years. If the discount rate is 5% per year (compounded annually), what is the current value of the annuity?

Question