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olasank [31]
3 years ago
9

You want to buy an annuity that will pay you $1000 per year for 20 years. You find an account that will pay 4% per year, compoun

ded annually. How much must you deposit today in order to fund this annuity?
Business
1 answer:
tresset_1 [31]3 years ago
3 0

Answer:

The amount to be deposited today = $13,590.33

Explanation:

<em>The amount to be paid for the annuity would the sum equal to the present value of the cash flow from the annuity.</em> The present value of an ordinary annuity is determined using the relationship below:

PV of annuity = A× ( (1-(1+r)^(-n) )/r

A- Annual cash flow

r- interest rate per annul

n- Number of years

PV- Present Value of annuity'

DATA

A-1000

r- 4%

n- 20

PV = 1,000 ×( (1 - 1.04^(-20))/0.04 =$13,590.33

The amount to be deposited today = $13,590.33

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3 years ago
Suppose interest rates in the UK fall. This will affect the side of the foreign exchange market and cause exchange rates to
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A fall in the interest rates in the UK, would cause the exchange rate of the UK to decline.

<h3>What is the impact of a fall in interest rate on exchange rate?</h3>

Exchange rate is the rate at which one currency is exchanged for another currency. Interest rate is the return earned by investors for allowing business owners use their funds.

When interest rate declines, the return earned by investors would fall. This would discourage investors from investing. This would lead to a decline in the demand for the UK currency. This would depress the exchange rate.

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2 years ago
If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:___________. A. frictional une
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3 years ago
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