Jay buys a 30-year annuity immediate with end of year payments of 8,000 for a price of P. He replaces his capital over 30 years with a savings account, which pays AEIR 6%. His APY is 5%. Please find P.

Question

Question

Jay buys a 30-year annuity immediate with end of year payments of 8,000 for a price of P. He replaces his capital over 30 years with a savings account, which pays AEIR 6%. His APY is 5%. Please find P.

finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Suppose the price of the annuity is equal to "P"

APY=((Payments/AEIR*[(1+AEIR)^n-1)]/P)^(1/n)-1
Here, n is the time period.
Prefers to the price of the annuity.

5%=((8000/6%*(1.06^30-1))/P)^(1/30)-1
5%=((133333.3333*(4.743491173))/P)^(1/30)-1
5%=(632465.4896/P)^(1/30)-1
1.05=(632465.4896/P)^(1/30)
(1.05)^30=(632465.4896/P)
4.321942375=(632465.4896/P)
P=632465.4896/4.321942375
So, the value of P=146338.2514

answered by: BugLittle

Add a comment

Answer 2

Similar Homework Help Questions

Jay buys a 30-year annuity immediate with end of year payments of 8,000 for a price of P. He replaces his capital over 30 years with a savings account, which pays AEIR 6%. His APY is 5%. Please find P.

Jay buys a 30-year annuity immediate with end of year payments of 8,000 for a price of P. He replaces his capital over 30 years with a savings account, which pays AEIR 6%. His APY is 5%. Please find P.
answer is $9508.90 explain without excel Gerry pays $W to buy a ten-year annuity with end-of-year...

answer is $9508.90 explain without excel Gerry pays $W to buy a ten-year annuity with end-of-year payments of $1,400. This purchase price allows her to replace her capital by means of a savings account that has an annual effective interest rate of 3% and also to earn an overall annual yield of 6% for the ten years of the annuity. Find W.
Problem 2.7 A loan of $8,000 must be repaid with 6 year-end level payments (i.e., constant...

Problem 2.7 A loan of $8,000 must be repaid with 6 year-end level payments (i.e., constant pay- ments). The effective annual loan rate is 11%. What is the annual payment? Problem 2.8 You make a deposit now into an account earning 6% annually in return for a payment of 250 at the end of each of the next 8 years. What should you deposit today? Problem 2.9 An annuity immediate has semi-annual payments of 1,000 for 25 years at a...

1. Calculate the accumulated value of an ordinary annuity of $4,200 a year for 6 years...

1. Calculate the accumulated value of an ordinary annuity of $4,200 a year for 6 years if the money is worth 71 2 %. 2. Find the future value of the cash flow of $600 a month for 5 years at 9% interest compounded monthly. 3. If Gabe makes a $450 deposit into his savings fund at the end of each quarter for 6 years, how much will he be able to collect at the end of the sixth year...
4-6 A man buys a ear for $18,000 with no money down. He pays for the...

4-6 A man buys a ear for $18,000 with no money down. He pays for the car in 30 equal monthly pay- ments with interest at 12% per annum, compounded monthly. What is his monthly loan payment? 4-1 Rose recently graduated in engineering. Her employer will give her a raise of $6500 per year if she passes the FE exam (Fundamentals of Engineering). (a) Over a career of 45 years, what is the present worth of the raise ifthe interest...
SIMPLE ANNUITY Instruction: Solve the given situations. Show your solutions (5 points each). 1. Find the...

SIMPLE ANNUITY Instruction: Solve the given situations. Show your solutions (5 points each). 1. Find the present value of an ordinary annuity with cash flows of $775.00 paid annually for 10 years at the interest rate of 1.40% per year, provided the interest is compounded annually. 2. Jon borrowed $46,000.00 to finance their college education. Jon has to make payments at the end of each quarter over the next 17 years in order to pay off this debt. How much...

Corporate Finance 5. An annuity with payments that occur at the beginning of each period is...

Corporate Finance 5. An annuity with payments that occur at the beginning of each period is known as a_____. a) annuity due b) discounted annuity c) ordinary annuity d) immediate annuity e) deferred annuity 6. The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time. a) True b) false 7. Which of the following mathematical...
question from 1 through 6 • value of each ance Annuities lab.com s onine 6-1. (Calculating the future value of an or...

question from 1 through 6 • value of each ance Annuities lab.com s onine 6-1. (Calculating the future value of an ordinary annuity Calculate the future valu edback the following streams of payments. a. £430 a year for 12 years compounded annually at 6 percent. b. €56 a year for 8 years compounded annually at 8 percent. c. $75 a year for 5 years compounded annually at 3 percent. d. £120 a year for 3 years compounded annually at 10...
Investing $13,000 for each of eight years in an annuity due with a 6% interest rate,...

Investing $13,000 for each of eight years in an annuity due with a 6% interest rate, the value at the end will be: ____________________________________________ Last year Blueridge Corporation's sales were $280 million. If sales grow at 10% per year, how large (in millions) will they be 5 years later? $14000(.10)=1400 How much would $200,000 due in 50 years be worth today if the discount rate were 7.5%? =PV(7.5%,,50,,-20000) =537.78426453 =$537.78 Five years ago, Glow Go Inc. earned $7.50 per share. Its earnings...

SHORT ANSWERS please USE THE FORMAT a - b - c - d 5-Which type of...

SHORT ANSWERS please USE THE FORMAT a - b - c - d 5-Which type of annuity best describes the insurance premium that you have to pay at the beginning of each period? a. Annuity due b. Deferred annuity c. Ordinary annuity d. Annuity in arrears 6-Richard takes the opinion of his investment advisor to invest any excess savings that he has. His advisor told him about a new issue of AAA rated bonds. Richard decided to buy a total...

Jay buys a 30-year annuity immediate with end of year payments of 8,000 for a price of P. He replaces his capital over 30 years with a savings account, which pays AEIR 6%. His APY is 5%. Please find P.

Homework Answers