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Tema [17]
3 years ago
10

If you put up $21,000 today in exchange for a 8.25 percent, 14-year annuity, what will the annual cash flow be

Business
1 answer:
BartSMP [9]3 years ago
8 0

Answer:

$2,584.34

Explanation:

we can use the present value of an ordinary formula to calculate this:

present value = annual payment x annuity factor

  • present value = $21,000
  • PV annuity factor, 8.25%, 14 periods = 8.12586

annual payment = present value / annuity factor = $21,000 / 8.12586 = $2,584.34

When the interest rates are not whole number, e.g. 4%, instead of trying to use a present value annuity table, you should look online for annuity calculators that will calculate the annuity factors for you.

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