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ch4aika [34]
4 years ago
15

You deposit $10,000 annually into a life insurance fund for the next 10 years, at which time you plan to retire. Instead of a lu

mp sum, you wish to receive annuities for the next 20 years. What is the annual payment you expect to receive beginning in year 11 if you assume an interest rate of 8 percent for the whole time period?
Business
1 answer:
Oksi-84 [34.3K]4 years ago
8 0

Answer:

The annuity is $ 7243,28

Explanation:

To calculate the following we can use a financial calculator.

We are making deposits of $10000 for 10 years. The interest rate is 8%

We need to work out the future value of the lumpsum in 10 years time.

n = 10 i = 8% pmt = 10000 COMP FV

FV = $ 144865,62

Now to calculate the annual annuity receivable we divide this amount by 20.

144865,62 / 20 = $ 7243,28

Thus the annual annuity you will receive over the 20 year period is $7243,28

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You interview with an athletic footwear manufacturer that has annual advertising expenditures of $32 million and total sales rev
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3 years ago
Four Seasons Hotels sell private residences in several of their properties and send direct mail to prospective residents asking
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Explanation:

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5 0
4 years ago
Calculate the effective annual interest rate for the following: a. A 3-month T-bill selling at $97,270 with par value $100,000.
WINSTONCH [101]

Answer:

(a) The effective annual interest rate for a 3-month T-bill selling at $97,270 with par value $100,000 is 11.71%

(b) The effective annual interest rate for a 13% coupon bond selling at par and paying coupons semiannually is 13.42%

Explanation:

(a)  A 3-month T-bill selling at $97,270 with par value $100,000

EAR =[par value /price]^n-1}

n = 3 months or 12/3 = 4 times  in a year

= [100,000/97,270]^4 - 1

=[1.028066]^4 -1

= 1.1171 - 1

= .1171 or 11.71%

b) EAR(coupon bond) = [1+.13/2]^2  -1

=[1+.065]^2 -1

= [1.065]^2 -1

= 1.1342 - 1

= .1342 or 13.42%

7 0
4 years ago
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