You have your choice of two investment accounts. Investment A is a 14-year annuity that features...
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You have your choice of two investment accounts. Investment A is a 14-year annuity that features end-of-month $1,200 payments and has a rate of 6.9 percent compounded monthly. Investment B is a lump-sum investment with an interest rate of 6.4 percent compounded continuously, also good for 14 years. |
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How much money would you need to invest in B today for it to be worth as much as Investment A 14 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Homework Answers
rate positively ..
| First we have to compute the future value of investment A | ||||||
| Put in calculator - | ||||||
| PV | 0 | |||||
| PMT | -1200 | |||||
| I | 6.9%/12 | 0.5750% | ||||
| N | 14*12 | 168 | ||||
| compute FV | $338,119.24 | |||||
| Now we have to compute the present value to get the required investment | ||||||
| FV | $338,119.24 | |||||
| PMT | 0 | |||||
| I | 0.5750% | |||||
| N | 168 | |||||
| compute PV | ($129,045.53) | |||||
| Ans = | $129,045.53 |
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