Question

Kevin Morales invests $15,451.93 now for a series of $2,900 annual returns beginning one year from now. Kevin will earn a return of 12% on the initial investment.
Required:
How many annual payments of $1,300 will Kevin receive?

Answer 1

Answer:

9 annual payments

Explanation:

The correct annual payment is $2,900 not $1,300 as shown below:

Kevin Morales invests $15,451.93 now for a series of $2,900 annual returns beginning one year from now. Kevin will earn a return of 12% on the initial investment.

(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

How many annual payments of $2,900 will Kevin receive?

In a bid to determine the number of annual payments of $2,900 that Kevin would receive, we can make use of a financial calculator bearing in mind that the calculator would be set to its default end mode before making the below inputs and that the amount invested today is the present value of annual payments

PMT=2900(amount of each annual payment)

I/Y=12(the rate of interest to be earned annually without the "%" sign)

PV=-15451.93 (amount invested, it is negative since it is an outflow)

FV=0(after all annual payments have been received, number of outstanding annual payments would be nil)

CPT

N=9.00