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Lostsunrise [7]
2 years ago
7

A 65-year-old retiree wishes to convert the cash value of his insurance policy into an annuity. He can select an annuity that wi

ll last 15 years or one that lasts 20 years. If the cash value is $450,000 and interest rates are 5.25%, how much less per year will he receive if he chooses the 20-year annuity
Business
1 answer:
insens350 [35]2 years ago
5 0

Answer:

The annual difference between Option 1 (15 years) and Option 2 (20 years) is $7,211.19 in favor of the first one.

Explanation:

Giving the following information:

Option 1:

Number of years= 15

FV= 450,000

i= 0.0525

Option 2:

Number of years= 20

FV= 450,000

i= 0.0525

To calculate the annual cash flow, we will use the following formula on each option:

A= (FV*i)/{[(1+i)^n]-1}

A= annual cash flow

<u>Option 1:</u>

A= (450,000*0.0525) / [(1.0525^15) - 1]

A= $20,464.72

<u>Option 2:</u>

A= (450,000*0.0525) / [(1.0525^20) - 1]

A= $13,253.53

The annual difference between Option 1 (15 years) and Option 2 (20 years) is $7,211.19 in favor of the first one.

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muminat
1/50+7 = 9.0 so the answer is 9.0
5 0
3 years ago
Your investment portfolio consists of ​$15 comma 000 invested in only one stocklong dashAmazon. Suppose the​ risk-free rate is 5
Kay [80]

Answer:

a)

The CAPM hypothesis states that the effective market is utilized place in the market and has the maximum eminent expected return of any assortment for a given randomness and the smallest variability for a assumed expected return. By allotment utilized place in the market assortment, you can achieve a standard return,

Thus,  

Expected Rate of Return = [Risk free Rate + Beta × (Market Risk - Risk free Rate)]

Beta = [Expected Rate of Return – Risk Free Rate] / [Market Risk - Risk free Rate]

Beta = [12% - 5%] / [10% -5%]

Beta = 7/5

Beta =1.4

The final possible instability while taking the same estimated rate of return as Amazon is $21,000 ($15,000 × 1.4) which indicate that it borrows $6,000 ($21,000 - $15,000). Now the -$6,000 is specified as strength benefit. So the volatility of the asset is,

Volatility = [Volatility of Asset x Beta]

Volatility = [18% × 1.4]

Volatility = 0.252 or 25.20%

Therefore the volatility is less than the volatility of Amazon.

b)

The market share has a instability of "n". The corresponding instability of Amazon will be 2.22 (40%/18%). So the assortment with the most notable predictable give back that has a faint variability from Amazon is $33,333.33 ($15,000x 2.22) which will be the market assortment and it also uses $18,333.33 ($33,333.33 - $15,000). Here the -$18,333.33 is specified as strength asset. So the return is,

Expected Return = [Risk free Rate + Beta × (Market Risk – Risk free Rate)]

Expected Return = [5%+ 122 × (10% - 5%)]

Expected Return = [5%+ 122 × 5%]

Expected Return = [0.05+0.111111]

Expected Return = 0.161111 or1 6.11%

Therefore the volatility is higher than the expected return of Amazon.

8 0
3 years ago
Following are a number of unrelated transactions for the Village of Centerville, some of which affect governmental activities at
Dmitrij [34]

Answer:

The answer is attached below

Explanation:

7 0
2 years ago
Rokhanna, Inc. issued $1,000 par value bonds with an 8% coupon. The bonds have 18 years to maturity. Market interest rates are 5
Zielflug [23.3K]

Answer:

Bond Price = $1294.65063 rounded off to $1294.65

Explanation:

To calculate the price of the bond today, we will use the formula for the price of the bond. Assuming the bond is an annual bond, the coupon payment, number of periods and annual YTM will be,

Coupon Payment (C) = 1000 * 0.08 = 80

Total periods (n) = 18

r or YTM = 0.054 or 5.4%

The formula to calculate the price of the bonds today is attached.

Bond Price = 80 * [( 1 - (1+0.054)^-18) / 0.054]  + 1000 / (1+0.054)^18

Bond Price = $1294.65063 rounded off to $1294.65

8 0
2 years ago
Persuasive messages convince someone to accept a product, service, or idea. To persuade effectively, the sender of the message m
STatiana [176]

Answer:

Persuasive messages convince someone to accept a product, service, or idea.

Explanation:

A persuasive message starts with highlighting the customers greatest benefit. It can be boldly  displayed on the heading or opening statement in a marketing conversation.

A persuasive message occurs when a person attempts to convince an individual or group to take certain specific actions•

In a business environment, the two types of persuasive messages are sales and marketing, which are utilized to convert intention to effective demand which translates into retained customers.

5 0
3 years ago
Read 2 more answers
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