5. Samantha buys a 12-year annuity immediate with semi-annual payments for a price X. Payments start...

Question

Question

5. Samantha buys a 12-year annuity immediate with semi-annual payments for a price X. Payments start at 5000, and decrease 50

Answer 1

Answer #1

Quarter	Cash Flow	Discounting Factor [1/(1.02^year)]	PV (cash flow*discounting factor)
1		0.980392157	0
2	5000	0.961168781	4805.843906
3		0.942322335	0
4	4500	0.923845426	4157.304417
5		0.90573081	0
6	4000	0.887971382	3551.885529
7		0.870560179	0
8	3500	0.853490371	2987.216299
9		0.836755266	0
10	3000	0.8203483	2461.0449
11		0.804263039	0
12	2500	0.788493176	1971.232939
13		0.773032525	0
14	2000	0.757875025	1515.750049
15		0.74301473	0
16	2000	0.728445814	1456.891627
17		0.714162562	0
18	2000	0.700159375	1400.31875
19		0.68643076	0
20	2000	0.672971333	1345.942666
21		0.659775817	0
22	2000	0.646839036	1293.678072
23		0.634155918	0
24	2000	0.621721488	1243.442976
25		0.609530871	0
26	2000	0.597579285	1195.15857
27		0.585862044	0
28	2000	0.574374553	1148.749106
29		0.563112307	0
30	2000	0.552070889	1104.141778
31		0.54124597	0
32	2000	0.530633304	1061.266607
33		0.520228729	0
34	2000	0.510028166	1020.056331
35		0.500027613	0
36	2000	0.49022315	980.4463007
37		0.480610932	0
38	2000	0.471187188	942.3743759
39		0.461948223	0
40	2000	0.452890415	905.7808304
41		0.444010211	0
42	2000	0.435304128	870.6082568
43		0.426768753	0
44	2000	0.418400739	836.8014771
45		0.410196803	0
46	2000	0.402153728	804.3074559
47		0.394268361	0
48	2000	0.386537609	773.0752171
		Price of Annuity = Sum of PVs	39833.31844

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Answer 2

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