Anton will deposit $1,000 into a savings account at the beginning of each month for the next 10 years.

Anton will deposit $1,000 into a savings account at the beginning of each month for the next 10 years. In return, he receives a payment of X at the end of each year forever, beginning at the end of the 11th year. Assuming an annual effective rate of discount of 5% for both accounts, determine X.

Solutions

Expert Solution

Future value of Annuity due = Amount * ( ( 1 + Interest per month)^periods -1) * (1 + Interest per month) / Interest per month

Future value of Annuity due = 1000 * ( 1.004167^120 -1) * (1.004167) / 0.004167

Future value of Annuity due = 1000 * 0.64701 * (1.004167) / 0.004167

Future value of Annuity due = $155929.29

2. Value of X = Future value of annuity due * Interest rate

Value of X = 155929.29 * 5 %

Value of X = $7796.46

jeff jeffy answered 2 years ago

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