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NNADVOKAT [17]
3 years ago
11

To save for retirement, Jamie decides to invest in an annuity that pays 5% annual interest, compounded annually. If Jamie contri

butes $2,000 annually for 20 years, how much interest would she earn during the 20 years?
Business
1 answer:
tatyana61 [14]3 years ago
6 0

Answer:

Interest= $26,131.91

Explanation:

Giving the following information:

Annual deposit= $2,000

Number of periods= 20 years

Interest rate= 5%

<u>First, we need to calculate the future value using the following formula:</u>

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

A= annual deposit

FV= {2,000*[(1.05^20) - 1]} / 0.05

FV= $66,131.91

<u>Now, we can determine the interest earned:</u>

Interest= future value - total investment

Interest= 66,131.91 - 20*2,000

Interest= $26,131.91

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The common stock of sweet treats is valued at $10.80 a share. the company increases its dividend by 8 percent annually and expec
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Using the Gordon Growth Model (a.k.a. Dividend Discount Model), the intrinsic value of a stock can be calculated, exclusive of current market conditions. In this model, the value of the stock is equated to the present value of the stock's future dividends. 

<span>Value of stock (P0) = D1 / (k - g)

</span>where
D1<span> = </span><span>expected annual </span>dividend<span> per share in the following year </span>
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<u>From the problem:</u>
The value of stock is $10.80
D1 is $0.40
g is 0.08

k is unknown

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Rearranging the equation for Gordon Growth Model to solve for k:

k = (D1/P0) + g

Substituting the variables with the given values, 

k = (0.40/10.80) + 0.08
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In percent form, this is
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C

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