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9. Olivia is 30 years old and has just changed to a new job. She has...

9. Olivia is 30 years old and has just changed to a new job. She has $37,500 in the retirement plan from her former employer. She can roll all of that money into the retirement plan of the new employer. She will also contribute $400 at the end of each month ($4,800 per year) into her new employer's plan. If the rolled-over money and the new contributions both earn an annual return of 5.85%, compounded monthly, how much should she expect to have when she retires in 35 years? A. $860,728
B. $843,576
C. $839,696
D. $820,912
E. $810,643


10. What is the present value of a monthly $150 annuity payment over 5 years if interest rates are 8.64% (APR)?
A. $7,067
B. $7,235
C. $7,287
D. $7,318
E. $7,340


11. What is the present value of a monthly $150 annuity due payment over 5 years if interest rates are 8.64% (APR)?
A. $7,067
B. $7,235
C. $7,287
D. $7,318
E. $7,340

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Answer #1

10. What is the present value of a monthly $150 annuity due payment over 5 years if interest rates are 8.64% (APR)?

Ans. C. $7,287

11. What is the present value of a monthly $150 annuity due payment over 5 years if interest rates are 8.64% (APR)?

Ans. C. $7,287

P = PMT x ((1 - (1 / (1 + r) ^ n)) / r)

Where:

P = the present value of an annuity stream

PMT = the dollar amount of each annuity payment

r = the interest rate (also known as the discount rate)

n = the number of periods in which payments will be made = 5 years x 12 = 60

Present value of annuity = $150 x ((1 - (1 / (1 + 0.0864) ^ 60)) / 0.0864)= $7,287

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