Question

You have your choice of two investment accounts. Investment A is a 9-year annuity that features end-of-month $2,180 payments and has an interest rate of 8 percent compounded monthly. Investment B is an annually compounded lump-sum investment with an interest rate of 10 percent, also good for 9 years. How much money would you need to invest in B today for it to be worth as much as Investment A 9 years from now

Answer 1

Answer:

Hence, $ 145548.77 should be invested in B today for it to be worth as much as investment A 9 years from now.

Explanation:

Future value of investment A

=2180*(((1+(8%/12))^(9*12)-1)/(8%/12))

=343196.39

How much money would you need to invest in B today

=343196.39/(1+10%)^9

=145548.77