ZuoTi.Pro
Question

You have a chance to buy an annuity that pays $85,000 at the beginning of each year for 20 years. You could earn 12.5% o...

You have a chance to buy an annuity that pays $85,000 at the beginning of each year for 20 years. You could earn 12.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

business   finance   
1 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

✔ Recommended Answer
Answer #1

Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate

=1.125*85,000[1-(1.125)^-20]/0.125

=85,000*8.14652253

=$692454.42(Approx).

1 1
Add a comment
Know the answer?
Add Answer to:
You have a chance to buy an annuity that pays $85,000 at the beginning of each year for 20 years. You could earn 12.5% o...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • You have a chance to buy an annuity that pays $3,300 at the beginning of each...

    You have a chance to buy an annuity that pays $3,300 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? a. $9,392.86 b. $7,420.36 c. $7,138.57 d. $10,426.07 e. $10,801.78

  • 1. You just inherited some money, and a broker offers to sell you an annuity that pays $32,200 at the end of each year f...

    1. You just inherited some money, and a broker offers to sell you an annuity that pays $32,200 at the end of each year for 50 years. You could earn 8% on your money in other investments with equal risk. What is the most you should pay today for the annuity?   2. You have a chance to buy an annuity that pays $85,000 at the beginning of each year for 20 years. You could earn 12.5% on your money in...

  • You are considering investing in an annuity that pays $7,000 at the end of each year...

    You are considering investing in an annuity that pays $7,000 at the end of each year for the next 20 years. You believe you could earn 6.1% on your money in other investments of equal risk. What is the most you should pay for the annuity? (Assume annual compounding/discounting. Answer in $s to the nearest dollar, i.e. xxxxx, with no commas or $ sign needed.)

  • (4pts) 1. You just inherited some money, and a broker offers to sell you an annuity...

    (4pts) 1. You just inherited some money, and a broker offers to sell you an annuity that pays $32,200 at the end of each year for 50 years. You could earn 8% on your money in other investments with equal risk. What is the most you should pay today for the annuity?

  • Your friend offers to pay you an annuity of $6,300 at the end of each year for 3 years in return for cash today. You cou...

    Your friend offers to pay you an annuity of $6,300 at the end of each year for 3 years in return for cash today. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?Select the correct answer.a. $16,996.98b. $17,002.88c. $17,014.68d. $17,020.58e. $17,008.78

  • Your friend offers to pay you an annuity of $2,900 at the end ofeach year...

    Your friend offers to pay you an annuity of $2,900 at the end of each year for 3 years in return for cash today. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? Select the correct answer. a. $7,834.61 b. $7,829.31 c. $7,824.01 d. $7,818.71 e. $7,813.41.

  • A lottery winner will receive $1 million at the end of each of the next ten...

    A lottery winner will receive $1 million at the end of each of the next ten years. What is the future value of her winnings at the time of her final payment (in millions of dollars), given that the interest rate is 9.5% per year? (Round your answer to three decimal places.) $ million -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Your grandmother has been putting $1,000 into a savings account on every birthday since your first (that is, when you turned one). The account pays...

  • nncta b. $16,110.34 c. $17,513.68 d. $17,976.84 e. $16,390.50 You want to go to grad school...

    nncta b. $16,110.34 c. $17,513.68 d. $17,976.84 e. $16,390.50 You want to go to grad school 3 years from now, and you can save $5,000 per year. De immediately. You plan to deposit the funds in a mutual fund which you expect to return 9% per year. Under these conditions, how much will you have just after you make the 3rd deposit, 9 years from now a. $14,976.84 b. $16,110.34 c. $17,513.68 d. $17,865.65 e. $18,349.15 You have a chance...

  • You want to go to grad school 3 years from now and you can save $5,000...

    You want to go to grad school 3 years from now and you can save $5,000 per year. De immediately. You plan to deposit the funds in a mutual fund which you expect to retur Under these conditions, how much will you have just after you make the 3rd deposit, 3 years in a. $14,976.84 6. $16,110.34 * using a financcu calculator c. $17,513.68 d. $17,865.65 e. $18,349.15 You have a chance to buy an annuity that pays $1,000 at...

  • Canvas →XCO DO 4 1/F questions from each chapter 4 theory questions from each chapter 4problems...

    Canvas →XCO DO 4 1/F questions from each chapter 4 theory questions from each chapter 4problems from each chapter You need to use Lockdown browser to take this em Timelimit: 2 hours You are allowed to have the following in the cam - Finance calculator One letter size page of formulas only. No written theory material or solved numerical comples - Empty sheets of paper for solving problems Question 37 3 pts You have a chance to buy an annuity...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT