Question

1. What is the present value of a 17 year ordinary annuity with an annual payment of $216,000 if the opportunity cost rate is 15.2%?

2.          An ordinary annuity pays $16,375 per year for 9 years. If you pay $100,000 for this annuity now, what rate of return (interest rate) will you earn?

3.          A 22 year ordinary annuity has a present value of $28,520. If the interest rate on this annuity is 12%, what is the amount of each payment?

4.          Your friend has just turned 22 years old and wants to be able to retire at age 50 with $1,000,000. If your friend can earn an after tax rate of return on investment of 8.64%, how much must she save annually beginning one year from now (for 28 years) in order to achieve this goal?

Answer 1

rate positively ..

Ans 1	We have to use financial calculator to solve this
	put in calculator -
	FV		0
	PMT		-216000
	I		15.20%
	N		17
	Compute PV		$1,292,843.78
	Ans =		$1,292,843.78
Ans 2	We have to use financial calculator to solve this
	put in calculator -
	FV		0
	PMT		16375
	PV		-100000
	N		9
	Compute I		8.55%
	Ans =		8.55%
Ans 3	We have to use financial calculator to solve this
	put in calculator -
	FV		0
	PV		-28520
	I		12.00%
	N		22
	Compute PMT		$3,730.72
	ans =		$3,730.72
Ans 4	We have to use financial calculator to solve this
	put in calculator -
	FV		1000000
	PV		0
	I		8.64%
	N		28
	Compute PMT		($9,412.60)
	ans =		$9,412.60